Apple Has to Pay Taxes in Every Country it Operates in

Apple Has to Pay Taxes in Every Country it Operates in

Apple Has to Pay Taxes in Every Country it Operates in

A study by the Tax Justice Network found that the OECD proposals, created to limit the scope of multinationals to avoid tax, could end up shrinking the tax paid in poorer countries.

The issue of taxing big cross-border multinational firms has become all the more urgent as a growing number of countries have adopted plans for their own taxes on digital companies in the absence of a global deal.

The Organisation for Economic Cooperation and Development (OECD) announced that in the future Apple and other companies will have to pay taxes in each country they sell products and services in (via Reuters).

Pascal Saint-Amans, Director, OECD Centre for Tax Policy and Administration, said: "Developing countries make up the most of the Inclusive Framework".

The overhaul would have an impact of a few percentage points of corporate income tax in many countries with no big losers apart from big worldwide investment hubs, Saint-Amans said.

France in particular has railed against European Union rules that let American heavyweights like Google, Apple, Facebook and Amazon declare their earnings from across the bloc in low-tax havens like Ireland or Luxembourg.

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Meanwhile, companies are facing increased uncertainty about their tax bills as countries challenge arrangements to pay tax in countries like Ireland rather then where their markets are. The EU has ordered Apple to pay Ireland nearly $15 billion in back taxes, for example, after finding that their tax deal was unfair because it was better than what other regular companies could expect.

"After promising the radical shift in worldwide rules that is urgently necessary, the OECD seems to be lapsing back into tinkering at the margins - doing little to redistribute profits from tax havens, and even less for the lower-income countries that lose the most to corporate tax abuse".

It would ensure that MNEs conducting significant business in places where they do not have a physical presence, be taxed in such jurisdictions, through the creation of new rules stating: where tax should be paid ("nexus" rules); and on what portion of profits they should be taxed ("profit allocation" rules).

The OECD proposals will outline rules like how much business a company must do in a country to be taxable there and how much profit can be taxed. The measures would apply to companies with revenues of more than US$821 million that operate across global borders and have a "sustained and significant involvement in the economy".

The third option would target all companies with a "sustained economic participation" via technology or other means, which could give a greater share of a firm's global tax payment to smaller countries.

Companies meeting those conditions would then be liable for taxes in a given country, according to a formula based on set percentages of profitability that remain to be negotiated. To meet that, the OECD said there'll need to be agreement on its unified approach by January. The hope is that the 134 countries that originally pushed for reform can reach an agreement in 2020.

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