G20 economic summit targets tax loopholes used by Apple, Google & othersA global economic crisis team of 20 leading nations has endorsed a proposal that would rein in tax avoidance practices employed by Apple and other tech firms.
Headquarters of Apple Sales International in Ireland, which handles most of Apple's overseas revenue.
The 40-page action plan drawn up by the Organization for Economic Cooperation and Development was revealed as part of the G20 summit in Moscow on Friday, according to Bloomberg. It would force international companies to pay additional taxes, preventing money from being diverted offshore to a tax haven like Ireland.
"The proposal aims to develop rules over the next two years preventing companies from escaping taxes by putting patent rights into shell companies, taking interest deductions in one country without reporting taxable profit in another, and forcing them to disclose to regulators where they report their income around the world," wrote reporters Jesse Drucker and Rainer Buergin.
Apple has been accused of using a number of subsidiaries in Ireland and the Netherlands to take advantage of low international tax rates. According to the OECD, countries that normally accommodate these practices including the Netherlands and Switzerland will back their proposed plans.
The OECD's proposal would attempt to stamp out tax avoidance, and is said to have the support of the Netherlands and Switzerland.In May, the U.S. Senate Permanent Subcommittee on Investigations produced a report outlining how Apple is able to avoid paying domestic taxes on its international sales through a process known as the "Double Irish." The method earned its name because companies are required to set up two Irish companies to utilize the loophole one company that owns the intellectual property rights, and another that licenses those rights and keeps its profits low.
Whatever profits are collected through the second company are taxed at a rate of 12.5 percent, or nearly a third of the 35 percent international tax rate imposed by the U.S. government.
Pascal Saint-Amans, director of the OECD's Centre for Tax Policy, referred to the strategy used by a number of companies as "double non-taxation." Two of the OECD's proposed regulations will make it harder for companies to move these profits offshore and would aim to keep the money in the country in which it originated.
Apple Chief Executive Tim Cook has adamantly denied that his company has skipped out on any taxes, \saying just before testifying before the U.S. Senate in May that Apple pays "every dollar" that it owes. At the hearings, Sen. Carl Levin accused the company of exploiting an "absurdity" in U.S. tax law, while Cook accused American tax codes of failing to keep pace with digital age.
On Topic: General
- Apple CEO Tim Cook joins roster of new trustees at Duke University
- Samsung Electronics revenue slides 8.4% after mismanaged Galaxy S6 launch
- Apple Store at Queens Center in NYC to open on Saturday
- Apple patent adds magnetic drive actuation to UK-style folding pin USB adapter
- Apple's push into automotive spurs race to cash in on car-as-device gold rush