G20 think tank OECD proposes blueprint for global crackdown on tax avoidance

“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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21 Comments

  1. The MDN take is kind of irrelevant. The issue the tax system needs tobe fixed so that real economic activity gets appropriately taxed in the country in which it occurs.
    That gives each country the opportunity to set tax policies which balance attractiveness to local and foreign companies with a tax rate high enough to be of benefit.
    It’s then up to the citizens of those countries to vote for the best government they think they can get. For those countries with low voter participation, well you get what you deserve.

  2. So long as all companies end up operating to the same rules, it will be OK. There is a problem when a multi-national like Amazon can currently exploit international tax regimes and then operate in a way which significantly disadvantages ‘normal’ companies operating from brick and mortar stores and employing local people.

    On-line businesses are clearly a part of our future, but they must not become the only option by being able to squeeze out conventional businesses.

    A level playing field is needed to allow local businesses to compete against the multinationals. At the moment, the odds are weighed far too heavily in favour of those multi-nationals.

  3. “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”
    Ron was a great actor and spokesman. I wonder who wrote that script for him.

      1. Not quite sure if you’re correct.

        The poster doesn’t seem to be denigrating MDN (the “person” quoting someone else); (s)he seems to be denigrating Ronald Reagan, since MDN apparently quoted Regan (implying that he is the author of the statement). If Reagan really was the first person to say this in public, then the poster’s question (who wrote the script?) may be valid. If it was previously stated by someone else, and Reagan was just quoting, then I’m sure somewhere in Reagan’s speech, this was made clear (unless Reagan was quoting without attribution, making it appear that he, or his speechwriters, came up with it). Either way, the post is rather unclear.

        And to finish your sentence, by your logic, it would be: “If you have, then your post makes you a great actor and spokesman”…

    1. Right. Toss in stupid racist ‘Tea Party’ worthy comments as a method of shooting yourself in the head.

      There are factual reasons for despising my current US government. Or are facts too difficult for you to understand?

      I think Rush Limbaugh is on the radio right now. Move along or you’ll miss his neo-con-job scripted talking points for the day! Then you won’t know what drivel to puke on us tomorrow. Hurry up now! Get a move on!

  4. Let’s see, we have 195 countries in this world. Does anyone really think they are all going to adopt the same tax code?

    Having a corporation-friendly tax code is a competitive advantage for a country like Ireland. So why would they adopt an anti-corporation tax code?

    1. Well, in addition to being one of the 193 countries of the world (the other ones aren’t officially countries, as they aren’t members of the UN), Ireland is also a member of the European Union. As such, it agreed to play fair within the EU. As a large block, EU is significantly more competitive globally than the individual countries that make it up. The reason it is competitive is because its members play by the same rules, so if someone’s rules make it uncompetitive for others, it undermines the competitive edge of the rest of the block.

  5. Corporations are business system entities, not citizens. BFD that people work there.

    Meanwhile, we can bet that these governments will NOT alter their tax laws to make it more friendly and wise to bring foreign income into their countries. Here in the USA we watched Senator Carl Levin make a total FOOL of himself at the Apple hearings rather than hint at bringing down the outrageous foreign income tax rate to something even as low as the normal US tax rate. These dimwits poliTards are the problem here. Clueless.

    Of course companies are NOT going to bring foreign profits home if they are PENALIZED for it! Incredible DUH Factor!

  6. “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

    Judge Learned Hand

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