OECD calls for global minimum corporate tax rate
Technology giants and other large multinationals will soon find it difficult to shift profits to low- or no-tax jurisdictions, with the Organisation of Economic Cooperation and Development (OECD) proposing measures to ensure they pay a minimum level of tax.
The Paris-headquartered organisation on Friday released a consultation paper proposing rules that would provide jurisdiction with a right to tax back where other jurisdictions have not exercised their primary taxing rights or the payment is otherwise subject to low levels of effective taxation.
The proposals include the second part of a review of global tax policy by the intergovernmental body, which oversees global co-ordination of taxes. Last month, it proposed that governments should tear up a century of tax history, by allowing countries to tax operations in their jurisdiction even if they did not have a physical presence there.
The two proposals together aim to eliminate the huge advantages some companies enjoy by moving profits around the world, to minimise the taxes they would otherwise be paying.
Together, they are intended to deter countries from lowering tax rates in an effort to attract those businesses.
"A minimum tax rate on all income reduces the incentive for taxpayers to engage in profit-shifting and establishes a floor for tax competition among jurisdictions," the OECD said in a statement.
The proposals would not only apply to tech giants such as Facebook, Apple, Amazon, Netflix and Google, but also other multinationals that make significant sums from intangible assets such as brands.
The specific levels of minimum tax rates have not yet been discussed as the OECD wants to reach agreement on the principles first.
Base erosion and profit shifting (BEPS) refers to exploiting gaps and mismatches in tax rules to shift profits by multinational companies to low-tax regimes. Internet companies operate out of low-tax jurisdictions, but do business in several others, without having a physical presence and end up avoiding taxes.
Experts say this plan could radically change the tax landscape globally as it deals with the issue of multinationals setting up intermediary operations in a low-tax jurisdiction before they set up base in any country to reduce the tax outgo.
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