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

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

Summary: 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.

TOPICS: Government UK, EU
(Image: CNET)

Tax avoidance schemes allegedly used by Apple, Amazon, Google, and others, could soon be stopped firmly in their tracks, if a coalition of Western governments gets its way.

According to the Reuters news agency, which has seen a draft report written by the economic and tax policy advisory group for G20 countries, the Organisation for Economic Cooperation and Development (OECD). According to the draft report, tax loopholes that allow these companies to pay zero tax in many European nations could soon be closed.

The OECD is charged with ensuring that loopholes that allow major technology companies can no longer siphon off their revenues and profits to countries with lower tax rates and avoid paying the full amount of tax in the jurisdictions they are located. 

For months, corporate tax avoidance has become a key political debate in numerous states around the European Union, notably in the U.K. and Ireland, where many of these companies have a physical presence. 

The OECD's "action plan," dated May 27, has already noted a number of schemes that allow 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 said.

In spite of teetering on the edge of further economic downturn and recessions, many EU countries are now stamping their feet with "enough is enough" rhetoric.

In the U.S., where the issue had previously been used as partisan political weaponry, politicians from both sides of the political spectrum have rallied together to investigate claims that U.S. companies may not be abiding by U.S. tax rules.

One such company was Apple, whose executives said in prepared remarks ahead of a Congressional testimony, that it had "created or supported" 600,000 jobs in the U.S. and had helped create an entire employment ecosystem around its application store offering.

But lawmakers disagreed in part with Apple's "what you see is what you get" tax approach, with claims by Sen. Carl Levin (D-MI), the chair of the U.S. Senate Permanent Subcommittee on Investigations, that while Apple does not evade paying its taxes, it sought out nefarious ways to avoiding paying the full amount of tax where it is located.

Apple chief executive Tim Cook said Apple would support a "reasonable tax rate" that would allow the multi-billion dollar technology giant to repatriate its cash from foreign banks back into the United States.

The OECD will table the plans for discussion at a G20 meeting later in July.

Topics: Government UK, EU

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  • How many Americans does it take to complete a tax return?

  • Trade negociations

    From the EU

    1. Give us our corporation tax back (retrospectively).
    2. Give us our privacy back.

    ... now we can talk about the new trade agreement.
  • Why don't we just report this story accurately

    Cash starved western nations are planning massive tax increases on businesses.
    • Agreed

      Cash starved Western nations are planning to recover retrospective taxes from global corporations who avoided payment in the countries where sales were made.

      I'd much prefer the headline 'cash starved companies begging for reduction in corporate tax rates' ...

      ... rather than 'failed banking industry and Governments sequester savings from personal bank accounts in Cyprus'.
      • Oh Ya, Ha Ha

        You are trying to tell me that Apple is Cash Starved with Something like $500,000 cash. Laughing all the way to their Bank.
        • Meant 500 Billion....

          in cash
    • ... or maybe ...

      'Governments are planning to close the loopholes which made global corporation tax effectively ZERO.'
    • Actually, the "official" targets might be businesses, but the real targets

      end up being the consumers.

      The EU countries and the U.S. and others, already understand that, businesses don't pay taxes, and that ALL TAXES are paid by the consumer.

      When a tax or regulation is passed on companies, the added cost of doing business is passed down to the consumer, via higher prices that consumers will pay for the products and services from those companies.
    • Actually, the "official" targets might be businesses, but the real targets

      Government officials understand how it works, but they feel they need to appease those who want to see corporations pay their fair share of taxes.
    • Actually, the "official" targets might be businesses, but the real targets

      Most people are not aware that, the higher prices they will be paying for goods and services, will be as a result of the higher costs of doing business for corporations.

      Higher taxes and new taxes and new regulations always add to the cost of doing business for corporations. But, those naive people will be happy, thinking that government is finally sticking it to the corporations; most people, like I said, are too naive to understand that, the government is really sticking it to them.
  • Some one please tell me

    How these poor Corporations with Billions in the bank are "Cash Starved"?

    And why should they get all the breaks when we don't get the same deal?

    Yes most of what they do is "legal" but not within the intent of the laws. Abusers they are for the most part, but we'd all do the same thing in the same position.
    • Corporations is another way of saying, "investor owned companies",

      and if you're going to go the envy and the "they are greedy" route, then you're attacking the investors, who are the ones with that stash of money.

      That big stash of money was earned by the corporations for their investors. Lately, the stash has gotten bigger for a lot of companies? Why is that the case. Basically, because a lot of companies don't want to invest in growing their companies in the current state of hostility that big governments have against them. When the corporations stop growing and stop hiring, the corresponding economies in which they reside, will also shrink. Politicians will point fingers at the big, bad, greedy companies, because, the naive populations will love them for it, but those politicians will not tell the people the real reasons why their economies aren't being productive and jobs are being lost.
  • Correct your aim...then go ahead and introduce new tax rules

    New York City alone loses $627 million in annual property tax revenue due to 9,500 churches being tax-exempt, according to a July 2011 analysis by New York's nonpartisan Independent Budget Office. What pray tell do they add to the economy?
    • Churches are not "big, bad, evil, greedy" corporations, which is what the

      people want to go after, via big government. Liberals are always targeting corporations anyway, which is where they believe the "greedy rich use the little people" to get their money.

      What do you have against churches anyway?
      • @adornoe

        Just making the observation that focussing on demonising one sliver of industry misses the point. Sure there is more tax you could collect from a variety of sources however where are the jobs and economic recovery gong to come from if not from industry and entrepreneurs both of whom will structure their affairs to maximise their returns (and rightly so).

        The UK turned a mosquito infested swamp in China into a word wide economic power house precisely by realising that the way to build a strong economy is through low tax and minimal red tape all round.
  • Always easier to rob than it is to create

    Which is exactly what the western nations are preparing to do. Mind you, these tax "loopholes" were deliberately put in by Congress and signed off on by the President in the U.S. Pure greed on the part of the politicians. In fact, it would be much cheaper for all the tech companies to hire assassins to kill the politicians attempting to put these new tax laws into effect. And in the balance, these acts of murder would probably be of greater benefit to the country as a whole than closing these so-called loopholes. Isn't that a sad thought?