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Reuters reports that plans for a major rewriting of international tax rules have been unveiled by the Organisation for Economic Co-operation and Development (OECD) that could eliminate structures that have allowed companies like Google and Amazon to shave billions of dollars off their tax bills. For more than 50 years, the OECD’s work on international taxation has been focused on ensuring companies are not taxed twice on the same profits hampering trade and limit global growth. But companies have been using such treaties to ensure profits are not taxed anywhere. A Reuters investigation last year found that three quarters of the 50 biggest U.S. technology companies channelled revenues from European sales into low tax jurisdictions like Ireland and Switzerland, rather than reporting them nationally. For example, search giant Google takes advantage of tax treaties to channel more than $8 billion in untaxed profits out of Europe and Asia each year and into a subsidiary that is tax resident in Bermuda, which has no income tax. “We are putting an end to double non-taxation,” says OECD head of tax Pascal Saint-Amans.
For the recommendations to actually become binding countries will have to encode them in their domestic laws or amend their bilateral tax treaties. The OECD says that it plans to hold an international conference on amending the network of existing tax treaties. Sol Picciotto, an emeritus professor at Lancaster University in Britain, says the recommendations are at least five to 10 years from becoming law, and that the jury is still out on whether they will accomplish their stated goals. “These are just tweaks,” says Picciotto. “They’re trying to repair an old motorcar, but what they need is a new engine.”
(Score: 3, Interesting) by frojack on Wednesday September 17 2014, @01:33AM
Its about time that the pendulum swings the other way.
About as much clarity as the article offers is this nugget:
The nations endorsed the creation of a detailed template under which companies would be required to report their revenue, profit and taxes paid in each jurisdiction in which they operate, giving national tax authorities a detailed picture of their operations.
So where the revenue comes from will be key.
But even that seems nebulous. Where does google operate? Anywhere they can be reached with a browser? Is the guy idly clicking on a Cadillac ad in some village in Bolivia "Business in Bolivia" or "Business in Michigan"? Where does the bill payer sit? Where does the server sit?
Seems to me Bolivia gets frozen out of any revenue in either case.
On the other hand why move money around the world if you are going to get taxed in the country where the money originated anyway? That does not bode well for the backwater countries of the world. Will this spread the wealth or concentrate it?
No, you are mistaken. I've always had this sig.
(Score: 0) by Anonymous Coward on Wednesday September 17 2014, @01:42AM
The "backwater countries" will win in this by being better able to tax mining and resource companies. They don't care about Google the way that you do.
(Score: 2) by urza9814 on Thursday September 18 2014, @07:34PM
Does Cadillac pay for that ad in Bolivianos, or in US Dollars?
It's not nearly as complicated as you make it seem. All that matters is the payment. If Cadillac US pays Google US to serve some ad to some guy in Bolivia, it doesn't matter that the ad is served in Bolivia, the payment is made in the US.
Although the laws haven't been written yet, I'd imagine it will come down to where the payment is received. So if someone in England orders from Amazon US, it'll be taxed as US income since Amazon US would be the entity processing the transaction. Doesn't matter where the buyer is. Just like the payment is going to be processed in USD, not in Pounds or Bolivianos.
(Score: 2) by frojack on Friday September 19 2014, @08:26PM
How sure are you of this?
Wouldn't two global companies choose to pay each other in a country with the most favorable tax structure?
GM Holdings LLC has offices in lots of south american countries, as [vault.com]does Google. [google.com]
The income of serving an ad in south america could be viewed as having been EARNED in south america, and the payments could he exchanged in south america, and the ads might even be served from Google's Data center in Chile [google.com].
So once again, I'm mystified how you can be so sure this was a transaction between Detroit and Mountain View.
No, you are mistaken. I've always had this sig.