“The Organization for Economic Cooperation and Development proposed a blueprint for cracking down on tax-dodging strategies used by companies such as Google Inc., Apple Inc. and Yahoo! Inc.,” Jesse Drucker and Rainer Buergin report for Bloomberg News. “German Finance Minister Wolfgang Schaeuble called the OECD’s plan a ‘major step.’ The proposal aims to develop rules over the next two years preventing companies from escaping taxes by putting patent rights into shell companies, taking interest deductions in one country without reporting taxable profit in another, and forcing them to disclose to regulators where they report their income around the world.”

“The 40-page report will complement efforts by deficit-laden governments to increase revenue they collect from profitable enterprises,” Drucker and Buergin report. “It follows hearings in the U.S. and U.K. revealing how companies avoided billions in taxes by attributing profits to mailbox subsidiaries in places like Bermuda and the Cayman Islands. The U.K. Parliament has held three hearings since November on corporate tax dodging — examining strategies used by Google, Amazon and Starbucks Corp. In May, the U.S. Senate held a hearing on Apple’s offshore tax strategies. The companies all say they’ve complied with international tax laws”

Drucker and Buergin report, “A pair of the OECD proposals calls for rules to make it harder to shift profits by assigning intellectual property, such as patent rights, to offshore units. Under current law, such offshore subsidiaries can take credit for profits arising from patents developed in countries like the U.S. and U.K. — generally with cash the parent companies provided to them in the first place. Though there is no real economic activity going on in Bermuda ‘all the returns are in Bermuda,’ said Pascal Saint-Amans, director of the Center for Tax Policy and Administration for the Paris-based OECD, not referring specifically to Google. ‘This is wrong, we need to fix it.’ The OECD is a government-funded think tank that was charged by the G-20 to tackle the issue.”

“Achieving the plan’s objectives may be hamstrung by the role that several European countries — including Ireland, the Netherlands and Luxembourg — play in enabling the avoidance, said Sol Picciotto, an emeritus professor of law at Lancaster University in the U.K. and a senior adviser to the Tax Justice Network advocacy group,” Drucker and Buergin report. “‘It depends on governments willing to take measures and the OECD doesn’t have any power to compel any governments to do anything,’ he said.

Read more in the full article here.

MacDailyNews Take: Let’s take this to its logical conclusion:

Imagine that certain profligate-spending countries get their hands on some extra money. What would happen?

Does anyone in their right mind really believe that these serial over-spenders and debt-addicts would finally balance their budgets and live happily ever after? You know, run their countries like Apple runs its business?

Likely not. Almost guaranteed, we’d bet, would be that these types of governments would quickly propose new, additional spending and then, after overspending as usual (after all, they’ve totally proven it’s their wont and, in fact, raison d’être) what would they do next? Where would these governments turn to get their next fix?

Government is like a baby: an alimentary canal with a big appetite at one end and no sense of responsibility at the other. — Ronald Reagan

Last autumn, Tim Worstall wrote an interesting article for The Register. In case you missed it:

Google, Apple, eBay shouldn’t pay taxes – people should pay taxes.

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