Seismic’ plan to get big tech and multinationals to pay their fair share could be in place by mid-2021
President Joe Biden has proposed sweeping global tax reforms that would limit the ability of multinational corporations to shift profits overseas, while taking steps to forge a landmark agreement on a worldwide minimum tax rate.
The proposals are designed to tackle the very low rates of tax paid by the digital giants Google, Facebook and Apple, and major brands like Nike and Starbucks, which have become adept at using complicated webs of companies to shift profits out of major markets like the UK, where most of their revenues are earned, and into low-tax jurisdictions like Ireland and the Caribbean. Economists estimate that the sums lost to exchequers around the world from profit-shifting have risen as high as $427bn (£311bn) annually.The Guardian view on taxing the tech giants: time to pay upRead more
The Biden plan, described as “seismic” in its potential impact, is seen as a dramatic shift, distancing the US from decades of prioritising the tax sovereignty of nations. The world’s largest economy has long resisted calls for the global treaties that tax reformers argued were needed to ensure that powerful multinational companies pay their fair share of taxes.
Under the plan promoted by Washington, set out in a document sent to 135 countries negotiating tax reforms at the OECD on Wednesday, tech companies and large conglomerates would be forced to pay taxes to national governments based on the sales they generate in each country, irrespective of where they are based.
The Biden administration also threw its weight behind work to establish a global minimum tax rate, which would see some of the world’s biggest economies agree on a minimum rate of tax on company profits. The current rate of corporation tax in the US is 21%, compared with 19% in the UK and 12.5% in Ireland, one of the lowest among EU nations.
Countries could impose higher corporation tax rates, but not go below the agreed threshold. The agreement is designed to stop countries luring businesses by offering tax discounts.