How to Make Sure Global Companies Pay Their Taxes

We all know by now that big multinational corporations, from Apple Inc., to Pfizer Inc., to IKEA of Sweden AB, minimize their tax bills by exploiting differences in tax rates and rules between different countries. Outrage is running high, especially in Europe, where there’s strong pressure on politicians to extract more taxes from big companies, especially the U.S. tech giants. 

There’s a clean and fair solution in plain sight. It’s not even new. It’s the system that U.S. states use to apportion tax liabilities among themselves. Canada and Switzerland, which also have federal-style governments, use the same system.

The apportionment solution is considered politically unrealistic on an international scale because tax havens don’t want it. That may be true. But it’s worth understanding the system anyway—if only to see how much better things could be if politics didn’t get in the way.

As a reminder, one of the main ways that multinationals minimize their corporate taxes is by attributing as much of their profit as possible to low-tax jurisdictions, ranging from countries with genuine economies, such as the Netherlands and Ireland, to pure tax havens, such as the Cayman Islands and Jersey. Alphabet Inc.’s Google saved $3.6 billion in 2015 employing a pair of strategies called the Double Irish and Dutch Sandwich. Ireland plugged the loophole that year, but companies already using it are allowed to continue until the end of 2020.

The key to the apportionment solution is to take away multinationals’ power to attribute their profit to different geographies as they wish. Instead, governments agree on a formula by which profit will be apportioned. Revenue is one good yardstick. If a company sells only 0.01 percent of its products or services to some dinky island nation, it will not be permitted to claim that it earned, say, 20 percent of its profit there.

Other yardsticks for potential apportionment include the number of workers or the value of physical assets in each country in which a company operates, although those criteria aren’t as useful in the digital world. (Google doesn’t need a lot of people or buildings in, say, Germany to earn a lot of money from selling ads there.)

Under an apportionment system, each country is still permitted to set its corporate tax rate however it chooses. But it will be able to charge its rate only on its little slice of the company’s global profit—a slice that’s determined by an agreed-upon formula. A country can no longer grab a bigger piece of a shrinking corporate-tax pie by cutting its rate below other countries’. In one stroke, the race to the bottom in tax rates is cut short.

The U.S. version of this is called the Multistate Tax Compact, which goes back to 1966. It ensures that each dollar of profit that a company earns in the U.S. is taxed once. Not more, but also not less. 

The European Commission, which is the executive arm of the 28-nation European Union, introduced an apportionment plan in 2011, calling it the Common Consolidated Corporate Tax Base. It was blocked by  Ireland, the United Kingdom, and the Netherlands, among others. It reintroduced the concept with a few tweaks in 2016 and has once again run into opposition. Brian Hayes, an Irish member of the European Parliament, called it a “back door” way of forcing tax harmonization on EU members.

Nations that oppose apportionment can’t simply be outvoted because under the European Union charter, fiscal issues require unanimity. So some people have tried to get creative. In his State of the Union address this month, European Commission President Jean-Claude Juncker proposed using a so-called “passerelle clause” to make the tax apportionment idea into something that could be passed with a simple majority.

The Juncker gambit is considered a long shot. Dan Neidle, an international tax expert with the law firm of Clifford Chance in London, says “there’s no chance, none” that the EU will change its rules to something like America’s Multistate Tax Compact. 

Stymied so far on the profit-apportionment idea, leaders of France and Germany, among others, are casting around for something else they can do to capture more tax revenue and assuage the public. French President Emmanuel Macron favors taxing the revenue rather than profits of digital giants as at least an interim measure. “It is impossible to convince the French people of the need to make labor market reforms if the internet giants are not paying tax,” French Finance Minister Bruno Le Maire said at a Sept. 15 press conference.

A tax on revenue might work politically, but economically it’s unsound. If you set the revenue tax rate high, it will wipe out companies that have lots of revenue but narrow profits. If you set it low to spare those companies, you won’t manage to extract a meaningful amount of tax from companies that earn huge profits on a smaller base of revenue. On Sept. 21, the European Commission promised to examine the revenue tax idea “alongside other options” but pointedly noted that “there are still a lot of questions around what the scope and basis of such a tax might be.”

J. Scott Marcus, a senior fellow at the Brussels-based Bruegel Institute who is an expert on the digital economy, says taxing revenue just because it’s easier to measure than profit is like looking for your keys under a streetlight just because the light is better there.

Meanwhile, back in the States, the Trump administration isn’t interested in arresting the race to the bottom in corporate tax rates. Just the opposite: President Trump favors a corporate income tax rate of 15 percent, which would be among the lowest among developed nations. 

Kimberly Clausing, an economist at Reed College, and Reuven Avi-Yonah, a professor at University of Michigan Law School, are among the few Americans focusing on the concept of apportioning profit governmentally to minimize tax avoidance. They’ve been at it since at least 2007. Clausing presented her research this month to the Independent Commission for the Reform of International Corporate Taxation (ICRICT).  

Clausing admits that in an economy dominated by intangible assets and ethereal products such as software, it’s hard to say for sure where a particular bit of profit was earned and therefore which jurisdiction should get to tax it. Using revenue as a criterion is a form of “rough justice,” she said in an interview. “It’s better than giving up and saying we’ll just tax consumption or labor.”

    Peter Coy
    Bloomberg Businessweek Columnist

    Peter Coy is the economics editor for Bloomberg Businessweek and covers a wide range of economic issues. He also holds the position of senior writer. Coy joined the magazine in December 1989 as telecommunications editor, then became technology editor in October 1992 and held that position until joining the economics staff. He came to BusinessWeek from the Associated Press in New York, where he had served as a business news writer since 1985.

    More From this publisher : HERE


  1. Don't Pay Taxes You Don't Owe Most Pay Is NOT Taxable Find Out Now.
  2. Step-By-Step Property Tax Appeal Guidebook With Many Examples Wins Big
  3. Do not stand at my grave and weep contains 250 sympathy poems,quotations and readings for funerals.
  4. Number 1 training center for making money via Adwords, Yahoo, Msn and Facebook.
  5. Welcome To The Next Generation Of Paid Survey Sites Some Affiliates Are Earning 1.60 per click
  6. Join Our Community To Learn All About Commodity Trading And Show Off Your Trading Skills
  7. You can value your coins right now with access to the right information
  8. Clickbank Ads

    If you like our content help us with a share… or two …  

    Also -  I have some free stuff for you .......

    Nr 1. In This FREE Report you can Discover:

    Secrets to acquiring the freshest, hottest leads via YouTube In-Stream ads quickly and easily! Best secret tips for the most effective targeting for your ads! Totally legal, but little-known method for literally stealing traffic from your competitors! Get more traffic to your videos and landing pages without spending a fortune! And much more - all within this special FREE report!


    Nr 2. Did you know you can Absolutely EXPLODE YOUR EMAIL LIST FOR FREE with UNTOUCHED offline sources?


    Nr 3. The #1 secret to becoming an affiliate superstar - Earn your first $100 online – without a dime to invest.

    If you’re still looking to “make it online – I have just the thing for you. It’s a video series that shows how to make your first $100 online – even if you don’t have a dime to invest. Yes – nothing.  Free.  Nada. Is this possible? You bet. It’s the most powerful system used by those “in the know”. Good things don’t have to be difficult. And they don’t only come to those who wait. Have A Look


    Nr 4. Top 10 Email Marketing Mistakes. Which of these mistakes do you make?


    Nr 5.  You can learn about : The hottest social networking site that will send an unlimited stampede of traffic to your site - for FREE! How to quickly locate a swarm of hungry buyers using "information portals"! The fast and easy way to use simple images to siphon targeted traffic, on command! Learn how to get the most possible traffic from Instagram, and make sure that traffic converts! And much more ...


    Nr 6. It’s no secret… Facebook is an incredible place to get tons of free, viral traffic. But… most people are going about it all wrong.  How many of these mistakes are you making? Download the free report to find out.


    Nr 7.  Special free report .  It's called "Operation Midas Touch" and you can download it here...

    The report features a surefire method for generating at least $1000 per week online,without a website or product of your own!

    Nr 8.  Instagram is still one of the hottest ways to get a LOT of traffic fast. All by sharing images. Sounds easy enough, yeah? Well, yes and no. If you want to really start driving a lot of  traffic and making sales using Instagram then you should download this report.

    Nr 9.  When it comes to creating a product online there are so many ways to approach it. Wouldn’t it be great to just get the meat of it all so you can get started faster? Well, the good news is, today you can download a guide called the Product Creation Formula Quickstart Guide. It’s as the title suggests - a Quickstart guide. You’ll get a list of action steps to take right away. Download your copy today !

    Nr 10. Would you like to finally USE all of that dusty PLR you have sitting around on your harddrive? Or maybe find the resources for the best PLR available - at the best prices? What about how to use that PLR to make you money with just a few minutes of work. Well, you’re not going to want to miss this!

      Nr 11. Buzzfeed’s top post has more than 21 million views. Think about that for a sec… ONE of their articles has had over 21 million people who have read it! And they have thousands of articles... what would you do with that kind of traffic? A friend of mine hacked their method and was able to use it to get 11,592 targeted new subscribers in 2 weeks on their very first attempt!

    Nr 12. Push notifications are one of today's hottest trends in website traffic and conversions, and for good reason. Studies have shown that as many as 40% of people will opt-in for push notifications, which is about TEN TIMES the rate of people who opt-in for emails! That’s huge! Not only that, but they're also highly effective at pulling clicks, as well. Some studies have shown CTR at an average of around 40%, with highs of as much as 80%! Again, that’s huge!

    Nr 13. Would you like to know how to get more money from the exact same number of website visitors you’re currently getting? Even if you’re website is getting as few as 1-2 visitors a day, this report will show you how to increase your profits using these few handy hacks.

    Nr 14. People have now realised that it's not the size of the list which matters, it's the quality. ... and the only way to create a quality list is by launching your own products. Let it be $7 ebooks, $17 info products, $27 video training product or software's... all of these work. My good friend Kevin Fahey has is revealing how he's launched over 20 products in the past 4 years, many of them top sellers. Needless to say he's banked a handsome amount in this time.

    Nr 15. Do you ever feel that the man you like or even love, just doesn't see you or desire you in way you want him to? Or... maybe you're able to get a man's attention though not the right kind of attention? Or... maybe you're still single because you wait and wait for men to approach you first? What you may not know is that the way we flirt will either attract the "wrong" man for us or the "right" man.

    Nr 16. When it comes to getting sales and leads online, there is ONE thing that 95% of marketers use... it's called a LIST. My friend Jimmy just released a free book that explains WHY a list is important and how YOU can build your own list. It's available right here (and it won't cost you a penny)

    Nr 17. If you have tried everything, and still aren't able to get your Ex back, then you need to pay attention.

    Nr 18. What if I told you that you could make ANY woman WANT to do ANYTHING for you? Would you think I'm crazy? Well... what If I told you that you could also make her LOVE every minute of it and come back for more?


    Nr 19. I have a special free plugin for you today. It's called "Covert Hover Mini"

    This plugin will triple your blog traffic by compelling your visitors to share your images on social media. This is some really clever stuff and it works like a charm. After you grab your free plugin, don't  forget to read the free bonus report as it will show exactly how and why this strategy works like crazy.

    Nr 20. The days of being able to get away with a basic WP theme and a pic or two are gone, your site needs to look good. Even Google are looking for you to have engaging graphics on your site. But getting good quality graphics made for your site is a pain, AND it will cost you both time and money (if you outsource it). But I have a special free download for you today. A virtual treasure chest of over 21K profit pulling graphics you can start sing today to generate more traffic & sales!

    Nr 21. 20 professional full HD background videos. These background videos are perfect for giving your videos that extra kick they need to stand out from the crowd Oh yeah they are in full 1080p HD too, I hope you'll enjoy them.

    Nr 22. If you've ever failed to create a WordPress site of your own or typically waste hours & even weeks trying to figure it all out on your own....

    Nr 23. No doubt, you've seen all of the video launches lately! There is a reason for it... Video marketing is a GREAT way to make money, and with the recent creation tools making it super accessable for anyone to get started... It's no surprise that more people are making videos. However... there is a missing element to most video marketing products...

    Nr 24. For the first time ever... You can get the straight scoop on how someone is selling over $1,000,000/year of t-shirts on Facebook!

    Use them  .... and have fun !