Watch out, tech firms: Governments plan to curb tax-skirting
The Organization for Economic Cooperation and Development has a 15-point plan designed to stop corporations from moving profits overseas and thus saving billions of dollars from being taxed.
Apple, Google, Amazon, and other major technology firms are likely keeping a close eye on the G20 Summit.
The Organization for Economic Cooperation and Development (OECD) unveiled Friday at the G20 Finance Ministers' Summit in Moscow a plan to limit the impact companies are having on international tax revenues.
Dubbed the Action Plan on Base Erosion and Profit Shifting, the roadmap explains how governments around the world can increase tax revenues from major corporations. The plan's 15 points specifically target domestic and international tax rules that allow companies to sidestep paying taxes.
"The Action Plan will develop a new set of standards to prevent double non-taxation," the OECD announced on Friday. "Closer international co-operation will close gaps that, on paper, allow income to 'disappear' for tax purposes by using multiple deductions for the same expense and 'treaty-shopping.' Stronger rules on controlled foreign companies would allow countries to tax profits stashed in offshore subsidiaries."
Apple, Google, Facebook, and several other major technology companies have been accused as of late of paying a relatively small sum in taxes on giant profits. Earlier this month, the Financial Times ran a report, saying that Apple paid no taxes in the U.K., despite generating millions in profits. The company apparently sidestepped the taxes by offering stock options to employees there.
That report came just months after news surfaced of major companies paying pennies on the dollar in taxes by moving profits to tax safe havens through subsidiaries. In total, governments around the world contend that major corporations -- and not just those in the technology industry -- are eliminating billions of dollars in taxes.
All of those companies, it should be noted, are apparently using tax strategies that are fully allowable under current law.
The OECD plans to change that with its plan. However, countries shouldn't expect much to change anytime soon. The OECD expects the plan to be implemented over the next 18 to 24 months. How companies will respond to the plan should be interesting.