New tax laws aimed at stopping multinational corporations from shifting their profits around the world may be blocked by the USA.
In an astonishing U-turn, the US is threatening to veto the move by the Organisation for Economic Co-operation and Development (OECD), which is backed by most of the world’s richest nations.
The US stand is even more surprising as President Barak Obama has led the charge to impose the Foreign Account Tax Compliance Act (FATCA) on the rest of the world in order to tax US taxpayers with offshore accounts.
The OECD proposal was due to be unveiled by a meeting of the G20 nations in Moscow on Friday (July 18, 2013).
The aim is to hinder multinationals like Google, Amazon, Apple and Starbucks from moving their profits from the countries where they are made to other nations where corporation tax rates are cheaper.
Corporations accused
Google is accused of channelling revenues from Britain through Ireland, and on to Bermuda, paying hardly any tax.
The OECD would also abolish the avoidance of tax residence, or permanent establishment – where businesses like electronics giant Dell avoid reporting revenues in markets where they have major sales.
The OECD tackling treaties designed to avoid double taxation of corporate profits are washed through “dual resident entities” to ensure no tax is paid.
A US Senate Committee has also accused Apple of setting up companies registered in Ireland and managed from the United States which are not tax resident in any country and avoid paying tax.
The problem for Obama is many of the corporations avoiding their taxes are American, and the backlash at home could be fewer jobs and less cash for expansion if they have to pay more money to foreign governments.
US self-interest
After all, the US is losing little tax; the corporations are shifting profits made mainly in the UK and Europe to nations like Ireland and The Netherlands, which have more benign corporation tax regimes.
The OECD plan provided for tax loopholes around the world to close within two years.
After reviewing a draft proposal, the US government wants a much toned down version that does little to resolve money shifting issues for other governments.
News agency Reuters said an unnamed Washington source had told them that the government did not want to see any sanctions against some of the country’s fastest growing and most profitable businesses.
