New European tax proposals aimed at Apple, Facebook, Google & other tech giants

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in General Discussion
The Organisation for Economic Cooperation and Development aims to overhaul worldwide tax laws that it says are no longer suitable in an age of multinational businesses such as Apple, Facebook and Google.

Apple's Irish headquarters
Apple's Irish headquarters


The Organisation for Economic Cooperation and Development (OECD) has revealed its initial proposals that will see individual governments being able to tax multinational companies more. While it does include retail businesses with physical outlets in different countries, it affects Apple, Facebook and most big tech firms. The new plans are chiefly concerned with any firm that earns income from these territories.

"The current system is under stress and will not survive if we don't remove the tensions," said Pascal Saint-Amans, OECD head of tax policy.

According to Reuters, Saint-Amans said that the planned overhaul would see an impact equivalent to a few percentage points of corporate income tax.

The companies affected are so far defined as ones that operate across borders and have a total revenue of over $821 million. They do not have to have a physical presence in the country, they solely have to have a "sustained and significant" customer base there.

The OECD revealed its proposals ahead of a meeting in Washington next week where finance ministers are to discuss them. Over 130 countries have already agreed in principle for the need for reform, and the OECD aims to present a more detailed outline agreement to them in January 2020.

The OECD plans for overhauling the multinational tax situation is only one of many continued efforts to address the rise of firms such as big tech ones that are able to earn large sums in countries that charge low taxes.

Apple has been appealing against the European Union's ruling that required it to pay $14.4 billion in back taxes to Ireland.

According to Reuters, the OECD plans would affect these lower-taxed regions, effectively ending their tax haven status.

Comments

  • Reply 1 of 12
    seanjseanj Posts: 74member
    The headline is wrong, the OECD isn’t a European organisation; eg USA, Canada, Mexico, Australia, Japan etc are all members.
    tmay
  • Reply 2 of 12
    crowleycrowley Posts: 6,060member
    I wonder why $821m is the floor.

    Also agree with previous post, the OECD is not a European organisation, though I suppose the proposal may have been driven by European members.
  • Reply 3 of 12
    Altogether it sounds like a good idea that will provide clarity to businesses while providing a consistent framework for delivering tax where it “belongs”. 

    While the discussion is often framed as tax avoidance, the core problem seems to be not what is owed, but to whom it is owed.

    The current example of Apple in Europe is strung not just between whether or not the tax should go to Ireland or the USA, but also other possible European recipients.

    After that point then the question of minimisation comes into play, and whether or not structuring a business to take advantage of lower taxation is a valid approach to operations. 
  • Reply 4 of 12
    crowley said:
    I wonder why $821m is the floor.

    Also agree with previous post, the OECD is not a European organisation, though I suppose the proposal may have been driven by European members.
    One of the few times a 9to5 article is more informative: https://9to5mac.com/2019/10/09/pay-tax-in-each-country/#disqus_thread 
    Relevant to your query: "To ensure a level playing field, a standard tax formula will be applied by all signatories to the agreement, based on a percentage of profits from local sales.
    One problem with this approach is that companies may use creative accounting to claim they have made no profit on sales made within particular countries. A common tactic used by many multinationals was to have local subsidiaries pay license fees to a global HQ for the use of intellectual property, with such fees wiping out their local profits. In some cases, these fees are paid to entities in offshore countries where no corporate tax is payable.
    To prevent this, a separate reform process will come up with minimum corporate tax rates that companies above a certain size must pay, irrespective of the profits or losses they claim to have made within individual countries."
    This seems to be designed for large multinationals, not just multinationals in general.  Just guessing that the $821 million floor catches the majority of the big players.
    muthuk_vanalingam
  • Reply 5 of 12
    crowleycrowley Posts: 6,060member
    crowley said:
    I wonder why $821m is the floor.

    Also agree with previous post, the OECD is not a European organisation, though I suppose the proposal may have been driven by European members.
    One of the few times a 9to5 article is more informative: https://9to5mac.com/2019/10/09/pay-tax-in-each-country/#disqus_thread 
    Relevant to your query: "To ensure a level playing field, a standard tax formula will be applied by all signatories to the agreement, based on a percentage of profits from local sales.
    One problem with this approach is that companies may use creative accounting to claim they have made no profit on sales made within particular countries. A common tactic used by many multinationals was to have local subsidiaries pay license fees to a global HQ for the use of intellectual property, with such fees wiping out their local profits. In some cases, these fees are paid to entities in offshore countries where no corporate tax is payable.
    To prevent this, a separate reform process will come up with minimum corporate tax rates that companies above a certain size must pay, irrespective of the profits or losses they claim to have made within individual countries."
    This seems to be designed for large multinationals, not just multinationals in general.  Just guessing that the $821 million floor catches the majority of the big players.
    Oh yeah, I'm sure that's the reason, the analyst in me is just wondering what calculation they did to come up with $821m.  Though tbh I'm not sure why there need be any floor.
  • Reply 6 of 12
    rob53rob53 Posts: 2,103member
    So is this only about American companies or is the threshold too high for any non-American company? Are we talking about all automobile companies, oil companies, clothing manufacturers? Or is this simply another money grab so foreign countries can get something out of the American company's apple pie?
    cat52icoco3uraharabshankwatto_cobra
  • Reply 7 of 12
    jcs2305jcs2305 Posts: 842member
    seanj said:
    The headline is wrong, the OECD isn’t a European organisation; eg USA, Canada, Mexico, Australia, Japan etc are all members.
    It was originally as Organisation for European Economic Co-operation led by France to help allocate US funds to rebuild Europe after WW2. In 1961 it was reformed and renamed to Organisation for Economic Co-operation and Development. At this time ( 1961 )  it was extended to non European states.










    watto_cobra
  • Reply 8 of 12
    bsimpsenbsimpsen Posts: 305member
    crowley said:
    I wonder why $821m is the floor.
    US$ might not be the currency used in the actual proposal. At current exchange rates, that’s about EU750M, a somewhat less random looking amount.
    CloudTalkinwatto_cobra
  • Reply 9 of 12
    rob53 said:
    So is this only about American companies or is the threshold too high for any non-American company? Are we talking about all automobile companies, oil companies, clothing manufacturers? Or is this simply another money grab so foreign countries can get something out of the American company's apple pie?
    While cynicism is always warranted when it comes to money. It’s important to understand that a multinational company owes taxes in the regions they exist and operate. In the same way that if you reside in a foreign country you are liable for taxation there. 
    watto_cobra
  • Reply 10 of 12
    seanjseanj Posts: 74member
    jcs2305 said:
    seanj said:
    The headline is wrong, the OECD isn’t a European organisation; eg USA, Canada, Mexico, Australia, Japan etc are all members.
    It was originally as Organisation for European Economic Co-operation led by France to help allocate US funds to rebuild Europe after WW2. In 1961 it was reformed and renamed to Organisation for Economic Co-operation and Development. At this time ( 1961 )  it was extended to non European states.










    In other words, the headline isn’t wrong, it’s just 58 years late?!? 😆
    uraharawatto_cobra
  • Reply 11 of 12
    rob53 said:
    So is this only about American companies or is the threshold too high for any non-American company? Are we talking about all automobile companies, oil companies, clothing manufacturers? Or is this simply another money grab so foreign countries can get something out of the American company's apple pie?
    Nope.  It's about closing tax loopholes and forcing large multinational companies to pay taxes where they do business.  If an automobile, oil, or clothing company was 1. using tax avoidance techniques to lessen their tax burden in countries where they were doing business and 2. exceeded the floor of EU$750 million, they would be affected by this.
  • Reply 12 of 12
    spice-boyspice-boy Posts: 1,025member
    Apple should not have to pay any taxes, why? Because I'm an Apple fanatic. 
    crowley
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