Global plan to tax Amazon, Google, Facebook could fall short, say economists
October 7, 2019 0 19
A global plan designed to ensure that technology giants like Amazon, Facebook and Google pay more taxes have been criticized by some economists who instead want to apply a minimum effective tax rate of 25% applied to profits and the end of special incentives offered in low-tax countries.
Australia has set aside a plan to tax the technology giants on their sales rather than their profits, and is waiting for a global plan from the OECD
But some economists are worried that the global plan will not go far enough and would benefit the OECD countries compared to developing countries
Although Australia has strong laws to combat tax evasion, companies like Facebook and Google can still legally transfer profits to low-tax nations
On Wednesday, the Organization for Economic Cooperation and Development (OECD) will launch its latest proposal to reform the way in which multinationals are taxed, with a final agreement to be reached by 2020.
The Independent Commission for Taxation of International Corporations (ICRICT), whose members include the famous economists Thomas Piketty and Joseph Stiglitz, and former labor treasurer Wayne Swan, fear that the OECD plan could to be watered down due to pressure to reach global consensus.
The professor at the School of Economics in Paris and ICRICT commissioner Thomas Piketty stated in a statement the current definition of the OECD, "will end up doing almost all the normal profit".
"It's a huge scam," said Dr. Piketty.
The OECD is pursuing its global plan as European countries such as France have introduced their taxes on sales of technology giants, a move that large companies have claimed is discriminatory and could result in double taxation.
The Australian government was also considering the taxation of digital sales, but then decided to wait for the OECD to reveal its global plan.
Treasurer Josh Frydenberg told ABC News that Australia has been "actively engaged" in OECD working groups, charged with developing a solution to bring the G20 back to 2020.
"A multilateral solution based on consensus on the fiscal challenges arising from digitization is the key to ensuring the integrity of our tax system," said Frydenberg.
"We will consider any proposals to ensure that all companies pay their fair share in Australia."
Call to stop the transfer of profits by tax companies as a single company
Groups like ICRICT and Tax Justice Network (TJN) want to see multinationals taxed as individual companies rather than being able to shift profits from one tax jurisdiction to another.
The objective of taxing multinational groups as a whole, rather than as various national branches, is in line with the proposals of the OECD and the International Monetary Fund (IMF).
But the ICRICT warned of the OECD's focus on the sales of a multinational, rather than incorporating the headquarters of the employees, it would benefit the OECD countries, rather than the developing countries.
The Columbia University professor and ICRICT commissioner Joseph Stiglitz said that corporate taxation is a moral issue and the global rules necessary to make the system fairer.
"The cost to society is enormous because if the richest companies in the world do not pay taxes, someone else has to support public services or public services are cut," said Dr. Stiglitz.
"This is what is happening. That is why today this problem has such a resonance".
The dott. Piketty said that the profits of large global companies must be declared globally and that taxes must be distributed among countries based on sales, employment level and in some sectors such as the digital world, it would also include user search .
"These criteria should not be subject to manipulation," he said.
Australia is still looking for a permanent solution
The Coalition has previously introduced other laws aimed at obtaining more taxes at the local level, including the international anti-avoidance law (MAAL) and the diverted profit tax (DPT).
The ATO has previously stated that MAAL has led companies to book additional $ 7 billion in sales each year in Australia, resulting in increased taxes.
While companies like Facebook and Google have already restructured their operations due to MAAL and pay slightly more than taxes here, the law only applies to sales contracts managed by sales teams in Australia.
ATO does not require technology giants to disclose foreign bookings to local customers.
This is why the laws have not been able to stop the legal practice of huge amounts of advertising revenue earned by companies like Facebook and Google that are still channeled through low-tax countries like Singapore.
Frydenberg said that since July 2016, local measures to counter multinational tax evasion have helped the ATO collect about $ 13.5 billion in tax liabilities towards large public and multinational groups, as well as individuals wealthy and associated groups.
Former labor treasurer Wayne Swan, who is also a member of the ICRICT, told ABC News that while Australia had some success in tackling the transfer of multinational profits, these they were mainly due to stronger transfer pricing laws introduced in 2012 by the former Labor government.
Armed with these laws, he stated that the ATO was able to successfully contend against the multinationals including Chevron.
"There is still no permanent solution to the problems being taxed of the value in which it was created neither here nor elsewhere in the world," said Swan.
"The central point on the reform of the system is to get the money from tax havens and bring them back to where the value was created – it certainly wasn't in Bermuda or Singapore."
He said the global OECD plan would also end unilateral measures, which have already caused a "deadlock" between the United States and France.
The problem is how to allocate tax rights
The Tax Justice Network also suggests that the OECD plan is imperfect and instead wants a global minimum tax to help developing countries protect their tax base.
He suggested that the minimum rate should be 15%, rising to 20% after a transition period.
"It should be as wide as possible, without carvings and revenues that merge only nationally," said TJN.
The ICRICT stated that currently the corporation tax accounted for 15% of total tax revenues in Africa and Latin America, compared to 9% in OECD countries.
A recent Oxfam and Tax Justice Network report also raised concerns about money going to developing countries, estimating that $ 1 billion in profits could have been moved out of Africa by Australian miners in a year.
"The choice to allocate the fiscal rights with reference to sales alone, as the OECD is considering, would disadvantage countries with relatively small domestic markets or those with substantial exports, particularly natural resources and tourism," he said. l & # 39; ICRICT.
"As rich countries consume more, it is likely that the allocation of profits only through sales will result in unfair distribution between countries," he said.
To avoid this, the ICRICT suggests a global effective minimum tax set at 25 percent, a rate determined by the average current tax rate of companies in G7 countries.
It recommends applying country by country laws, without allowing multinationals to offset high taxes in some countries by shifting some revenues into low-tax jurisdictions.
It also suggests that there are no incisions for incentive schemes, such as the "patent box" schemes, as it is recognized by the OECD that this "would undermine the political intent and effectiveness of the proposal" .
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