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| G-20 Backs Plan to Curb Tax Evasion by Large Corporations | G-20 Backs Plan to Curb Tax Evasion by Large Corporations |
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| MOSCOW — Government officials from the world’s largest and richest economies have endorsed a blueprint to curb widely used tax avoidance strategies that allow some multinational corporations to pay only a pittance in income taxes. | MOSCOW — Government officials from the world’s largest and richest economies have endorsed a blueprint to curb widely used tax avoidance strategies that allow some multinational corporations to pay only a pittance in income taxes. |
| In one widely cited example, Starbucks has managed to post a profit of nothing in Britain even after selling untold millions of beverages and baked goods. Apple drew scrutiny for leaving billions of dollars in profits overseas and instead passing along the fruits of its commercial success to shareholders by taking out loans. | In one widely cited example, Starbucks has managed to post a profit of nothing in Britain even after selling untold millions of beverages and baked goods. Apple drew scrutiny for leaving billions of dollars in profits overseas and instead passing along the fruits of its commercial success to shareholders by taking out loans. |
| In light of such practices – which are entirely legal, but take advantage of differing tax rules around the world – the Organization for Economic Cooperation and Development is proposing that all nations adopt a list of 15 new tax principles for corporations. The plan focuses only on corporations and would, if adopted widely, shift some of the global tax burden toward large companies and away from small businesses and individuals. | |
| The list, presented Friday at a meeting of finance ministers of the Group of 20 countries in Moscow, includes ideas to prevent corporations from so-called “treaty shopping” for the best pair of countries to do business in – presumably, one with good infrastructure, education and defense, the other with low taxes. | |
| The group recommended strict rules for defining where a company has a permanent presence. It also proposed three measures to limit the practice of transfer pricing: the shunting of profits and losses between subsidiaries disguised as internal corporate payments for goods or, increasingly common, copyright or patent royalties. | |
| If accepted, the countries in the Group of 20 would commit to the reform at a gathering of heads of state in St. Petersburg, Russia, in September. | If accepted, the countries in the Group of 20 would commit to the reform at a gathering of heads of state in St. Petersburg, Russia, in September. |
| “It’s a matter of justice and fairness,” Angel Gurría, the secretary general of the O.E.C.D., said at the presentation of the new plan with the finance ministers of France, Britain, Germany and Russia. | |
| Pierre Moscovici, the minister of economy and finance of France, said some multinational corporations manage to pay an income tax of 3 percent or so. “This is unbelievable to our fellow citizens, who pay their fair share,” he said. | Pierre Moscovici, the minister of economy and finance of France, said some multinational corporations manage to pay an income tax of 3 percent or so. “This is unbelievable to our fellow citizens, who pay their fair share,” he said. |
| Shifting profits to low-tax countries and costs to high-tax countries is less an option for small businesses and individuals, who inevitably wind up carrying more of the tax burden as a result. | Shifting profits to low-tax countries and costs to high-tax countries is less an option for small businesses and individuals, who inevitably wind up carrying more of the tax burden as a result. |
| In the United States, for example, corporate profit taxes contributed 40 percent of all income tax to the United States Treasury 50 years ago. Today, corporations contribute less than 20 percent, with the slack taken up by small companies and those paying individual income tax. | In the United States, for example, corporate profit taxes contributed 40 percent of all income tax to the United States Treasury 50 years ago. Today, corporations contribute less than 20 percent, with the slack taken up by small companies and those paying individual income tax. |
| The instance with Starbucks in Britain is telling. It legally reported profits close to nothing after paying high prices for coffee and for brand royalties to other subsidiaries of the coffee giant that were domiciled outside the jurisdiction of British tax authorities. | The instance with Starbucks in Britain is telling. It legally reported profits close to nothing after paying high prices for coffee and for brand royalties to other subsidiaries of the coffee giant that were domiciled outside the jurisdiction of British tax authorities. |
| In contrast, the owners of a small coffee shop would probably not be able to pay royalty fees to an overseas company owning the rights to the name of their cafe, thus increasing their costs and lowering their tax liability. That multinationals can quite easily do so, however, creates an uneven playing field for small restaurant owners, critics contend – even if they provide better coffee at a better price. | |
| The reform is intended to address such inequities, the minsters said. | The reform is intended to address such inequities, the minsters said. |
| Starbucks violated no laws in Britain. All the same, the company volunteered to pay about $16 million in additional taxes to the British government in future years, saying it understood its British customers were upset by the outcome of the tax rules the company was following. | |
| Though the United States did not have a representative at the presentation, the Obama administration has endorsed the international reform and signed an initial commitment earlier this year. | Though the United States did not have a representative at the presentation, the Obama administration has endorsed the international reform and signed an initial commitment earlier this year. |