By Noah Barkin
BERLIN (Reuters) - A new German government should crack down on tax avoidance by multinational firms without waiting for its European partners to act, an influential member of the Social Democrats said ahead of a new round of exploratory coalition talks with Angela Merkel.
Norbert Walter-Borjans, finance minister for the big state of North Rhine-Westphalia (NRW), told Reuters he expected the fight against tax evasion and profit-shifting by companies to be a major topic of discussion if the SPD enters more formal negotiations with Merkel's conservatives.
Walter-Borjans has made a name for himself by backing the purchase of data on secret Swiss bank accounts from whistleblowers. He works for Hannelore Kraft, the powerful regional premier of NRW who is expected to play an important role for the SPD in any future coalition talks.
"Until we get a European solution, Germany can take steps at the national level," Walter-Borjans said, arguing for new rules to tackle the practice of firms placing intellectual property with subsidiaries in tax havens, which then charge affiliates in countries like Germany or Britain fat fees for its use.
The licensing charges reduce tax bills in major markets. Revelations that companies like Apple (NSQ:AAPL), Google (NSQ:GOOG), Amazon (NSQ:AMZN) and Starbucks (NSQ:SBUX) have reduced their tax bills in this way have helped drive corporate tax avoidance to the top of the international political agenda in the past year.
"We can place a limit on how much firms can deduct by paying royalties for intellectual property," Walter-Borjans said. "Or we can introduce a minimum taxation rate, independent of whether profits are being shifted to affiliates in countries like the Netherlands or elsewhere."
The leaders of the G20 group of nations have all backed an effort by the Paris-based Organisation for Economic Cooperation and Development (OECD) to tackle corporate tax avoidance.
But the comments by Walter-Borjans show that the SPD, if they enter the government, will not be prepared to wait another two years for the OECD to submit its recommendations for change.
His remarks also suggest the SPD will demand a tougher stance against tax avoidance in talks with Merkel, whose conservatives emerged as the dominant political force in an election last month, but must find a coalition partner to rule.
A second round of exploratory discussions between Merkel and the SPD is scheduled for Monday. More formal talks on forming a right-left 'grand coalition' could start in late October.
Walter-Borjans said Merkel's conservatives had a "huge interest" in cracking down on tax avoidance, in part because they need to come up with new revenue streams to pay for billions of euros in planned public investment in infrastructure, education and research.
The SPD favours tax hikes on the wealthy to pay for these investments, but Merkel's party has ruled those out, without explaining how it will come up with the necessary funds.
In the interview, Walter-Borjans warned Merkel's party against assuming it could plug the hole by reviving a bilateral tax deal with Switzerland that was blocked last year by SPD regional leaders, led by Kraft, because they said it was too lax on tax dodgers.
"It's clear that we won't be able to resolve this with a very small, one-off back-tax payment from Switzerland," he said.
Instead, Walter-Borjans said Germany should use its muscle to pressure Switzerland into agreeing to the automatic exchange of information on holders of Swiss bank accounts, similar to the deal it has done with the United States.
"How quickly we can achieve this, I don't know. But if we wait for others, it won't happen fast," he said.
(Additional reporting by Tom Bergin in London; editing by Patrick Graham)
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