Osborne: G7 agree to target tax evasion and avoidance

George Osborne co-chaired the two-day meeting in Buckinghamshire with Sir Mervyn King

The G7 group of industrialised nations have agreed that there must be collective action against tax evasion and avoidance, the UK's finance minister has said.

Chancellor George Osborne said after the talks that it was "incredibly important" that firms and individuals paid the tax they owed.

The members agreed on more policy issues than had been assumed, he added.

The G7 comprises the US, Germany, the UK, Japan, Italy, France and Canada.

In a news conference held jointly with Bank of England governor Sir Mervyn King, Mr Osborne said the finance ministers and central bank governors of the G7, meeting in Aylesbury, Buckinghamshire, had also agreed no bank should be "too big to fail".

Tax avoidance

"We must put regimes in place... to deal with failing banks and to protect taxpayers and to do so in a globally-consistent manner," he said.

The issue of tax avoidance had been raised by Britain, Germany and other countries earlier this year.

They asked the Organization for Economic Co-operation and Development (OECD) - which advises rich nations on tax policy - to examine possible changes to address the problem of multinational companies using transfer pricing rules to shift profits into tax havens.

BBC business correspondent correspondent Joe Lynam said the latest talks were an important step towards a new global standard on tax.

Britain wants all EU countries to sign up to a pilot scheme where tax authorities share information with each other, including low tax countries such as Luxembourg and Austria, our correspondent said.

Germany, France, Spain, Italy, the UK and US are currently signed up to the scheme. Luxembourg has said it will join too, but Austria has yet to confirm if it will take part.

Mr Osborne also said that British territories, including the tax havens Jersey and the Cayman Islands, need to play more of a part in trying to put a stop to tax evasion.

"Of course you have to respect that many of these territories have important industries and we don't want to unnecessarily damage them," he said.

"But it is necessary to collect tax that is owed and it is necessary to reduce tax avoidance and the crown dependencies and the overseas territories need to play their part in that drive and they need to do more."

The chancellor said the discussions had "reaffirmed that there are still many challenges to securing sustainable global recovery, and we can't take it for granted".

But he added: "We are committed as the advanced economies in playing our part in nurturing that recovery and ensuring a lasting recovery so that we have prosperity in all our countries."

Prior to the meeting, Mr Osborne had said the group still wielded "major economic firepower" as they represented around half the global economy between them - although the larger G20 was now the "primary economic forum for setting the global rules of the game".

In other developments:

• Japan was not censured during the talks, despite talk ahead of the meeting it would be criticised for a massive stimulus plan that had pushed down the value of its currency, the yen. There are concerns Tokyo is engineering an export-led recovery that could hinder other regions' ability to grow.

• German Finance Minister, Wolfgang Schaeuble, said the eurozone crisis is no longer the main risk for the global economy. He said a "relatively high level of liquidity" could cause problems and that he had told Japan there are already consequences of its policy to pump money into its economy.

• European Central Bank President, Mario Draghi, said the G7 countries did not call on central banks to do more to boost the world economy.

The meeting came as the British chancellor faced pressure over the pace of the UK's austerity measures.

G7 conference participants "agree on more than people thought" said George Osborne

Last month, the International Monetary Fund's (IMF) chief economist, Olivier Blanchard, reiterated his belief that the chancellor should slow down the pace of the cutbacks.

But on Saturday, Mr Osborne said that while the UK's economic situation was difficult, "we are making progress and the economy is healing".

Shadow Treasury Minister Catherine McKinnell countered that it was "disappointing that this G7 meeting has failed to set out any concrete steps to promote economic growth or tackle tax avoidance."

She added: "George Osborne should reflect on why Britain is experiencing the slowest economic recovery of any G7 country other than Italy.

"With Britain's economy flatlining and living standards falling, it's no wonder even the IMF is saying the chancellor's failing policies need to change."