Getting corporations to pay their share of taxes

I have written before about one method by which huge highly profitable corporations avoid taxes. The way it works is for a big company in the US (say) to buy a small company in a country that has favorable tax laws, Ireland being the current favored nation. They then ‘invert’ the relationship, claiming that the foreign company is the parent one while the US one is the subsidiary, even though nothing else has changed. This enables them to pay the lower taxes of the other nation while enjoying all the benefits of being in the US. This practice even has a name: ‘corporate perversion’.

Now the group of wealthy countries known as the G7 (Canada, France, Germany, Italy, Japan, UK, and US) has agreed to a system to address this scandalous practice.

The G7 group of wealthy nations have signed a landmark deal to tackle tax abuses by some of the world’s biggest multinationals and establish a minimum global corporation tax for the first time.

As part of the plan, finance ministers also agreed to the principle of a global minimum rate that ensures multinationals pay tax of at least 15% in each country in which they operate.

The US president, Joe Biden, initially proposed a minimum tax rate of 21%, but was persuaded to water down the plan to 15% to make it acceptable to a wider group of countries. Critics said the G7 had let multinationals off the hook with a tax rate that failed to prevent tax havens from undermining countries that set higher rates to pay for the extra costs incurred during the pandemic.

The agreement, which reverses several decades of beggar thy neighbour policies, is aimed at multinationals that have played one country against another to drive down the level of tax they pay.

Digital businesses such as Amazon, Google and Facebook, which have built huge businesses across the world while only declaring relatively small profits in each country, will also be caught by the agreement.

G7 leaders hope the agreement will be endorsed by the G20 group of nations, which includes China, Russia, South Africa and Saudi Arabia, later in the year.

More than 130 countries are participating in a parallel exercise to agree a global tax framework as part of a deal put together by the Paris-based Organisation for Economic Cooperation and Development (OECD), which is expected to follow the lead set by the G7 at meetings in October.

The US Congress would have to pass a law in order to adopt this policy and usually all Republicans and right wing Democrats would ally to block any attempt to raise the corporate tax rate.

But this is where there is an interesting wrinkle. Trump hates Amazon and Facebook and he may demand that his Republican lackeys in Congress pass this in order to hurt those companies, putting them in a bind as to whom they will be most servile, Trump or corporate America.


  1. says

    Its bullshit. The US could make it hard for Apple or Microsoft or whoever to do business in the US if they pull tricks like that. But those companies own congress; they’re the boss. It’s easier to extract the money from everyone below the upper class, since they can’t put up a fight or complain. Ah, oligarchy!

  2. consciousness razor says

    Lowering the rate by 6% is not getting them to “pay their fair share.” This graph from wikipedia shows it hasn’t been that low since 1937 (when it was still increasing under FDR, with other bills also cracking down on tax evasion and removing certain loopholes).

    And like Marcus said, we don’t have to play this game anyway.

    Also something we didn’t need to do: donating hundreds of billions of dollars to corporate shareholders last year — practically no public discussion about it either, over the mere days after it was introduced and before it was passed/signed, at which point it was too late. So how much fucking support should they expect to get, when all they do is shit on this country, its economy, and the people in it (not to mention doing the very same crap to lots of our allies and trade partners)?

    Anyway, there are 193 member states in the UN. We’re talking about seven of them. If a corporation still wants to evade taxes by planting its flag somewhere else, what they’re describing does absolutely nothing to stop that.

    G7 leaders hope the agreement will be endorsed by the G20 group of nations, which includes China, Russia, South Africa and Saudi Arabia, later in the year.

    Oh, well, I didn’t know they were familiar with hope chess. Very clever. So maybe, you might hope, we’re talking about twenty countries instead of seven. Totally different story. Now it’s mate in three (for the other side).

    They should just call it The Shit Sandwich Act of 2021. Or was that name already taken?

  3. mailliw says

    Why do private individuals pay tax on their income, while companies pay tax on their profits?

  4. garnetstar says

    Trump cannot manage to do anything that works right, can he? The only reason the democrats won the senate in 2020 is that Trump blew his lid about the election after November and before the GA run-offs in January .

    Now, he might be responsible for corporations *finally* being taxed fairly! And, if he keeps trolling about his reinstatement, that might turn off voters from his hand-picked (and therefore crazy) candidates in 2022. Which might prevent, or at least impede, the republicans’ plans to end democracy in America.

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