New European tax proposals aimed at Apple, Facebook, Google & other tech giants

The Organisation for Economic Cooperation and Development aims to overhaul worldwide tax laws that it says are no longer suitable in an age of multinational businesses such as Apple, Facebook and Google.

The Organisation for Economic Cooperation and Development (OECD) has revealed its initial proposals that will see individual governments being able to tax multinational companies more. While it does include retail businesses with physical outlets in different countries, it affects Apple, Facebook and most big tech firms. The new plans are chiefly concerned with any firm that earns income from these territories.

"The current system is under stress and will not survive if we don't remove the tensions," said Pascal Saint-Amans, OECD head of tax policy.

According to Reuters, Saint-Amans said that the planned overhaul would see an impact equivalent to a few percentage points of corporate income tax.

The companies affected are so far defined as ones that operate across borders and have a total revenue of over $821 million. They do not have to have a physical presence in the country, they solely have to have a "sustained and significant" customer base there.

The OECD revealed its proposals ahead of a meeting in Washington next week where finance ministers are to discuss them. Over 130 countries have already agreed in principle for the need for reform, and the OECD aims to present a more detailed outline agreement to them in January 2020.

The OECD plans for overhauling the multinational tax situation is only one of many continued efforts to address the rise of firms such as big tech ones that are able to earn large sums in countries that charge low taxes.

Apple has been appealing against the European Union's ruling that required it to pay $14.4 billion in back taxes to Ireland.

According to Reuters, the OECD plans would affect these lower-taxed regions, effectively ending their tax haven status.

12 Comments

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seanj 16 Years · 322 comments

About 5 years ago

The headline is wrong, the OECD isn’t a European organisation; eg USA, Canada, Mexico, Australia, Japan etc are all members.

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crowley 15 Years · 10431 comments

I wonder why $821m is the floor.

Also agree with previous post, the OECD is not a European organisation, though I suppose the proposal may have been driven by European members.

EsquireCats 8 Years · 1268 comments

Altogether it sounds like a good idea that will provide clarity to businesses while providing a consistent framework for delivering tax where it “belongs”.

While the discussion is often framed as tax avoidance, the core problem seems to be not what is owed, but to whom it is owed.

The current example of Apple in Europe is strung not just between whether or not the tax should go to Ireland or the USA, but also other possible European recipients.

After that point then the question of minimisation comes into play, and whether or not structuring a business to take advantage of lower taxation is a valid approach to operations.

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CloudTalkin 5 Years · 918 comments

crowley said:

I wonder why $821m is the floor.

Also agree with previous post, the OECD is not a European organisation, though I suppose the proposal may have been driven by European members.

One of the few times a 9to5 article is more informative: https://9to5mac.com/2019/10/09/pay-tax-in-each-country/#disqus_thread
Relevant to your query: "To ensure a level playing field, a standard tax formula will be applied by all signatories to the agreement, based on a percentage of profits from local sales.
One problem with this approach is that companies may use creative accounting to claim they have made no profit on sales made within particular countries. A common tactic used by many multinationals was to have local subsidiaries pay license fees to a global HQ for the use of intellectual property, with such fees wiping out their local profits. In some cases, these fees are paid to entities in offshore countries where no corporate tax is payable.
To prevent this, a separate reform process will come up with minimum corporate tax rates that companies above a certain size must pay, irrespective of the profits or losses they claim to have made within individual countries."
This seems to be designed for large multinationals, not just multinationals in general. Just guessing that the $821 million floor catches the majority of the big players.

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CloudTalkin said:

crowley said:

I wonder why $821m is the floor.

Also agree with previous post, the OECD is not a European organisation, though I suppose the proposal may have been driven by European members.

One of the few times a 9to5 article is more informative: https://9to5mac.com/2019/10/09/pay-tax-in-each-country/#disqus_thread
Relevant to your query: "To ensure a level playing field, a standard tax formula will be applied by all signatories to the agreement, based on a percentage of profits from local sales.
One problem with this approach is that companies may use creative accounting to claim they have made no profit on sales made within particular countries. A common tactic used by many multinationals was to have local subsidiaries pay license fees to a global HQ for the use of intellectual property, with such fees wiping out their local profits. In some cases, these fees are paid to entities in offshore countries where no corporate tax is payable.
To prevent this, a separate reform process will come up with minimum corporate tax rates that companies above a certain size must pay, irrespective of the profits or losses they claim to have made within individual countries."
This seems to be designed for large multinationals, not just multinationals in general. Just guessing that the $821 million floor catches the majority of the big players.

Oh yeah, I'm sure that's the reason, the analyst in me is just wondering what calculation they did to come up with $821m. Though tbh I'm not sure why there need be any floor.