Decision Time for the Future of Corporate Taxation
Despite some recent steps in the right direction, the current international tax system is outdated and fails to prevent egregious tax avoidance by digital multinational companies. The world needs a corporate tax system that is fit for the digital economy and benefits developing and developed countries alike.
NEW YORK – At first glance, it appears to be a bureaucratic meeting like any other. But the discussions at the OECD in Paris at the end of this month are of the utmost importance, because the world’s richest countries will present new proposals for taxing digital multinational companies such as Google, Amazon, Facebook, Apple, Netflix, and Uber.
Back in 2012, when scandals related to tax-avoidance schemes by Apple, Amazon, and Google unleashed public anger and forced the G20 to act, the OECD was called on to reform the international corporate tax system. That led, three years later, to a package of reforms known as the “Base Erosion and Profit Shifting” Project, or BEPS. The reform process was led by OECD countries and opened up to developing countries only after this initial package was unveiled. Today, 125 countries are involved, forming a group called the “Inclusive Framework.”
BEPS was undoubtedly an important step toward tackling some of the most egregious tax-avoidance strategies used by multinationals. It initiated, for example, the sharing among tax authorities of country-by-country reports on these companies’ profits and tax payments. Unfortunately, however, this norm will apply only to very large multinationals, and the reports will not be publicly available, depriving civil society of an essential tool of transparency.