The tax rules need rewriting for the digital age, and finally the world’s governments are doing something about it. On Friday, the Organization for Economic Cooperation announced that 137 governments around the world have agreed to launch a rewrite of tax rules for multinational companies the digital age.
Tax officials from the countries in question have agreed to meet in Paris for negotiations about how this might work. The aim is to crack down on the kind of tax avoidance that can happen when multinationals shuttle their profits around to different countries.
“It’s moving fast because what is at stake is a massive trade war,” OECD head of tax policy Pascal Saint-Amans told journalists in Paris. “This is what we see on a daily basis with the interaction between France and the U.S. and with the interaction between the U.S and the countries that have said they would launch digital services taxes.”
Tax rules for the 2020s
A report published by the British organization Fair Tax Mark late last year accused tech giants of avoiding more than $100 billion in taxes over the past decade. Apple, the largest tax payer in the world, has always insisted that it pays every last cent it owes.
However, that hasn’t stopped it from running afoul of governments periodically. Most famously, Apple was hit with a massive $14.4 billion tax bill by the EU in August 2016. It claimed Apple took advantage of illegal state aid that let it route profits through Ireland. The investigation alleged that Apple paid the equivalent of as little as 0.005% on all European profits in 2014. The Fair Tax Mark, for its part, claims Apple had a tax rate of 17.1% over the past decade.
Tim Cook, for his part, has been vocal about his belief that the tax system should be updated. Speaking in Ireland earlier this month, he said he “desperately” wants a fairer system. Cook noted that, “logically everybody knows it needs to be rehauled. I would certainly be the last person to say that the current system or the past system was the perfect system.”
Source: Reuters