By Richard Johnstone | 10 September 2013 

An agreement reached by the Group of Twenty nations to tackle tax avoidance had been welcomed by Action Aid as a first step towards limiting losses that cost developing countries more than they receive in aid each year.

However the charity said developing countries must be given a greater role in combating tax avoidance to ensure measures can be coordinated across the globe.

Following the meeting of the G20 in St Petersburg over the weekend, leaders pledged to implement a new global standard on the automatic exchange of information, as developed by the Organization for Economic Co-operation and Development.

The agreement stated that an ‘ambitious’ plan to share more tax data to cut down on tax avoidance was ‘clearly needed’.

Under the agreement, a new global forum will establish a mechanism to monitor and review the implementation of the new standard on automatic exchange of information. This body will also work with the OECD Task Force on Tax and Development, the World Bank Group and others to help developing countries identify any technical assistance and capacity building required, so they can ‘reap the benefits’ of the reforms.

‘These efforts will help developing countries secure the corporate tax revenue they need to foster long-term development,’ the G20 statement said.

The declaration also committed the countries to create a common template for companies to report their worldwide allocation of profits and tax to national administrations. This will require more transparency between governments, with countries needing to disclose rulings and other tax benefits.

The communiqué said these reforms should be put in place over the next two years.

Commenting on the agreement, Action Aid tax policy adviser Toby Quantrill said the commitments were welcome.

‘The G20 agreements on tax reform have the potential to put an end to tax dodging that costs developing countries more than they receive in aid each year and we are pleased that the G20 leaders affirmed their commitments on automatic information exchange and leading a process to crack down on tax avoidance.’

However, the statement ‘still gives little assurance that these tax reform processes will respond to the needs of the world’s poorest countries’. A pledge that developing countries will benefit from the plans would ring hollow unless action was taken to give poorer countries a seat at the table in global tax discussions, he added.