U.S. 'blocks' tax avoidance reform plans, proposals watered down

Summary:'Enough is enough,' say EU countries trying to crack down on the global tax avoidance problem. But the U.S. isn't playing fair, and behind closed doors is stamping its feet.

France may not have the backing it wants to push through sweeping international tax reforms. The culprit? The U.S., which reportedly threw its political toys out of the international diplomatic pram.

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Governments to target U.S. tech tax avoiders, says leaked draft action plan

A leaked action plan seen by Reuters suggests an impending crackdown in tax avoidance by Western governments on major technology firms, which seek to lower their tax bills through less-than-ideal — albeit legal — methods.

It comes at a time when the EU member state continues to battle against some key tech companies for allegedly avoiding paying the full amount of tax in the country.

Last week, a leaked action plan, seen by the Reuters news agency , suggested that G20 countries were preparing to crack down on companies like Apple, Amazon, Google, and others who use less-than-desirable tax avoidance schemes to lower their overall tax bill.

In some cases, "lowering" actually means "negating." Some companies, such as Starbucks, paid zero corporation tax in recent years.

Microsoft faces a €52.5 million ($68m) tax bill in France. Meanwhile, in the U.K., politicians continue to dig into Google and Amazon. Tax authorities raided LinkedIn offices in France earlier this year, amid claims that the company fluffed up somewhere.

The economic and tax policy advisory group for G20 countries, the Organisation for Economic Cooperation and Development (OECD), wants to close the tax loopholes that allow these companies to pay zero tax in many European nations.

The OECD's action plan, dated May 27, specifically called on these companies to shift their profits elsewhere in the world. "Domestic and international tax rules should be modified in order to more closely align the allocation of income with the economic activity that generates that income," the document noted.

It comes at a time when European nations are now demanding "enough is enough."

But the U.S., according to reports, cried afoul, because Washington officials are calling for "moderate" changes rather than massive overhauls, according to sources familiar with the matter speaking to The Guardian.

While the Americans want changes to the rules, they do not want widespread, sweeping changes, unlike the French and some other G20 nations. Tweaks to existing international tax treaties are good for American multinationals, the publication noted, citing its sources, but it doesn't want new passages "spelling out how the digital economy should be taxed."

But because the OECD is consensus driven, the action plan is expected to pass through with watered-down recommendations in key areas.

Only a few weeks ago, Apple was at the center of a committee hearing in Congress to explain how its tax arrangements work, in a bid by lawmakers to determine whether the company is avoiding paying the full amount of tax.

The U.S. government, however, kept its nose out of the legislative branch hearing.

Many shouldn't be surprised. When the U.S. stamps its feet, it often gets its way. No more so than recent developments in the EU Data Protection reforms that would have seen anti-U.S. spying clauses included in the final draft removed after a leaked copy of the regulation was outed, just weeks before it was publicly announced.

Lo and behold, the U.S. pressured the EU into removing the clauses, which would have prevented PRISM-like surveillance on EU citizens had the regulation been ratified there and then.

Topics: Tech Industry, Government : US

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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