back to article G7 nations aim for global 15 per cent tax on big tech and bin digital services taxes

The G7 group of nations has proposed a minimum 15 per cent tax rate for multinational entities and the removal of digital services taxes. The G7’s members are Canada, France, Germany, Italy, Japan, the UK and the US, with the European Union participating as a guest. The Group’s finance ministers and central bank governors met …

  1. HildyJ Silver badge
    Boffin

    "Tax havens that facilitated profit-shifting, and big tech’s lawyers and accountants, are already hard at work on new schemes that get around the G7 proposal."

    Ya think?

    According to Wikipedia, "The strongest consensus amongst academics regarding the world's largest tax havens is therefore: Ireland, Singapore, Switzerland and the Netherlands (the major Conduit OFCs), and the Cayman Islands, British Virgin Islands, Luxembourg, Hong Kong and Bermuda (the major Sink OFCs), with the United Kingdom (a major Conduit OFC) still in transformation.

    The UK can certainly decide to stop being a conduit (where revenues and profits are shifted) and could, perhaps, do something about the sinks (where profits are declared) of the Cayman Islands, British Virgin Islands, and Bermuda. The EU could, perhaps, strong arm Ireland, the Netherlands, and Luxembourg. But that still leaves the rest of the world to bargain with tax lawyers. If El Salvador goes through with its plans to adopt Bitcoin as a legal currency, could their next step be to open a new tax haven?

    1. tip pc Silver badge

      What’s an OFC?

      1. doublelayer Silver badge

        It stands for off-shore financial center. Otherwise known as tax havens or where to hide your cash.

    2. Anonymous Coward
      Anonymous Coward

      The UK can, the EU could

      and yet, despite all the strong words, action appears not... forthcoming. Wonder why...

      1. gandalfcn Silver badge

        Re: The UK can, the EU could

        One of the reasons the Brexiteers wanted Brexit was because the EU was and still is tightening up on tax havens and therefore a lot of money was donated to disseminate bs about the EU etc. together with the garbage from media owned by very interested parties with all their loot stashed offshore. And it worked. The UK is the biggest culprit so I doubt if much will change.

  2. Winkypop Silver badge
    Facepalm

    Too soft too weak

    And who do you think will end up paying this 15%?

    That’s right, consumers!

    Give yourself an A+

    1. Yes Me Silver badge
      Headmaster

      Re: Too soft too weak

      Yes, that's how the tax system works: it moves money from the consumer to the government, to pay for essential services and to support redistribution of wealth to make society fairer. What tax havens do is distort the tax system in a way that favours the rich, deprives many governments of necessary revenue, and obstructs fair redistribution.

      So, the G7's goal here is noble. Of course, it's also bound to fail, since the G7 is only seven countries and most tax havens aren't included. Only a very strong set of WTO rules can do the job.

      1. MiguelC Silver badge

        Re: G7 is only seven countries and most tax havens aren't included

        True, but the idea behind this scheme is to allow signatory countries to collect the difference between what companies pay on those tax heavens and the minimum tax, now defined at 15%.

        So if an American (e.g.) company pays 1% corporate tax in any tax heaven, the IRS are allowed to collect an additional 14%.

        Not perfect, but better than nothing.

        Much more important (and fairer) would be to effectively tax companies where they do business and stop them shifting profits to lower tax countries (that his scheme doesn't stop), depriving the countries originating the business from collecting corporate tax (in the example above, profits originating from UK sales would still end being taxed in the US).

        1. DS999 Silver badge

          Re: G7 is only seven countries and most tax havens aren't included

          So if an American (e.g.) company pays 1% corporate tax in any tax heaven, the IRS are allowed to collect an additional 14%.

          That's ALREADY true for American companies, since they are taxed on worldwide income, and the "offshore profits" loophole was closed. If a US company is able to move money around have all its offshore profits taxed at 1%, it will owe 9.5% to the IRS (the minimum rate for offshore earnings is currently 10.5%)

          Upping the 10.5% to 15% will mean more money going to the IRS, but how does it help say the UK? US companies are still free to use creative accounting that moves profits from the UK to Ireland or Bermuda or whatever.

          Though actually that 15% is a minimum rate countries that agree are allowed to charge, the tax is 20% of profit above a 10% margin. Which I guess leaves out companies that can claim lower margins by moving revenue around, and even those that don't won't get hit for the full 20% unless they make a profit of over 30%!

      2. Potemkine! Silver badge

        Re: Too soft too weak

        Of course, it's also bound to fail, since the G7 is only seven countries

        Not that sure. These nations have several ways to blackmail negotiate with others to follow the rules, with the probable exception of China

      3. gandalfcn Silver badge

        Re: Too soft too weak

        "G7 is only seven countries and most tax havens" The UK is responsible for most of them and could readily do something, but it won't.

    2. jemmyww

      Re: Too soft too weak

      That's not necessarily true. A tax on profits means the companies can choose to pass it on or not. Whether they do or not is probably reflective of the competition. Some (Apple) can probably get away with charging more where others (Amazon?) might have less elasticity to play with.

      1. Anonymous Coward
        Anonymous Coward

        Re: Too soft too weak

        "companies can choose to pass it on or not"

        Oh dear...

        1. rcxb

          Re: Too soft too weak

          It's true. They can sell the products at lower margins instead of marking it up the entire 15%, which they will do if competition forces them to keep prices down.

    3. LDS Silver badge
      Facepalm

      Re: Too soft too weak

      What do you prefer? To pay for your school and hospitals also, or pay for the next Bezos/Zuckerberg/Cook ginormous yacht/mansion only?

      Raising prices may hit profits more than taxes. Only bling goods prices can bi fixed (mostly) at will - as the average consumer doesn't really care about the price - and higher prices can even make them more exclusive.

      But in all the other sectors higher prices may shift sales to competitors, or simply reduce sales. And since that's still a small dent in their huge profits, they would be really avid and stupid trying to kill the golden eggs goose with a sharp price increase.

    4. mevets

      Re: Too soft too weak

      Not all companies are able to make use of these revenue diversion schemes, possible due to size, regulatory compliance, and even, gasp, a general sense of decency.

      Currently, such companies are at a competitive disadvantage with their less scrupulous competitors.

      To this point, the consumers are already paying for this; and if this change is successful, it will merely remove the cheating advantage that some companies enjoy.

      Brick by brick the Reagan/Thatcher cathedral is being dismantled.

      1. Adelio Silver badge

        Re: Too soft too weak

        maybe what they should do is ignore costs from other parts of the company that are not related to physical goods.

        So costa coffee camen islands cannot charge a shed load of money for licencing to costa coffee UK.

        any anything they do charge had to be at market prices. Not charging $1000 a kilo for coffee.

    5. Arthur the cat Silver badge

      Re: Too soft too weak

      And who do you think will end up paying this 15%?

      That’s right, consumers!

      Not unless the company is a monopoly(*). Corporation tax impact mainly falls on employees and shareholders, with the split being dependent on the country's tax laws. (In the US it tends to hit shareholders, in Europe it hits employees more.) If the company tries to raise prices for the consumer their rivals undercut them and take their business.

      (*) Which will cause other problems for the company.

      1. Grease Monkey Silver badge

        Re: Too soft too weak

        I think some people are missing the point of what this ruling does about tax havens.

        At the moment what companies are doing is setting up a tax domicile in one of these havens then funneling all the money through that domicile and say "we are paying tax in country X so we don't have to pay tax in country Y"

        What this ruling says is that the tax is to be paid in the country where the business is transacted, rather than where the money ends up.

        So using Amazon as an example if you buy goods from amazon in the UK then the transaction is counted as having taken place in the UK for tax purposes. In other words Amazon can't then claim to be paying tax on that money outside of the UK.

        Where this fails is that there is a lower limit of 10% profit margin on these taxes and Amazon claim to operate on 6.5% margins and as such still won't be liable to pay any tax.

        I've never understood why corporations pay tax on their profits, but individuals pay tax on their income.

        1. stiine Silver badge
          WTF?

          Re: Too soft too weak

          Is that where my browswer is running, or where the web server is running, or where the van that delivers it to me is based?

        2. Adelio Silver badge

          Re: Too soft too weak

          do not forget individulas in the UK have a threshold amount thery do not pay tax for (approx 12k for basic rate taxpayers)

    6. Filippo Silver badge

      Re: Too soft too weak

      Not necessarily. It's true that corporations pass any increase in costs to the customers, but this makes them less competitive against companies that weren't dodging taxes to begin with (i.e. small/medium businesses). And more competition is just about the only thing that can actually lower prices for customers in reality.

  3. Anonymous Coward
    Anonymous Coward

    $314.73bn

    $13.6bn in revenue for the 2020 financial year. That was up from $9.9bn a year earlier.

    ...

    From 2019 to 2020, the Microsoft subsidiary's profit after tax increased from $9.93bn to $314.73bn

    Those numbers still don't make sense to me. How can a company make $314.73bn profit on $13.6bn revenue? Are we sure there isn't a misplaced decimal point somewhere? After all, the story was 'broken' by the Grauniad, not famed for their proofreading.

    1. LDS Silver badge

      Re: $314.73bn

      Maybe some creative accounting to create huge expenses somewhere else to avoid to pay taxes there?

      "Look, Microsoft country X has bought the rights on the new Azure logo for 200 billions from Microsoft Bermuda, so we can't really pay taxes for the next one hundred years, we are very sorry..."

    2. Arthur the cat Silver badge
      Happy

      Re: $314.73bn

      the story was 'broken' by the Grauniad, not famed for their proofreading.

      To the extent that grauniad.co.uk redirects to their main site.

  4. Velv
    Mushroom

    " just last week the USA warned it believes that digital services taxes disproportionately affect its tech companies"

    You can't have it both ways.

    Either those companies are American in which case the Americans can tax them, or they're Bermudan, Liberian, Cayman, etc. Get you're own house in order, you can't have American tech companies using offshore facilities to reduce tax and increase profits while at the same time preventing other countries from leveraging fair taxes.

    1. Len

      That is a reasonable point, to look at ultimate registration for companies. Your massive headquarters and R&D labs might be in Paris, if you are registered as a Delaware company then you are not a French company but an American one (not naming any names but this is an actual example).

      I had hoped that the pandemic rescue funds would sort this out a bit. Oh, you are an "American/Spanish/German/British/Danish" company and want to apply for support funds? Why not ask help from your own government, that of the Cayman Islands?

      Unfortunately in practice it's a lot harder than this. The Italian government could have told Agip, Aprilia, Barilla, Benetton, Enel, Eni, Ferrari, Ferrero, Fiat, Luxottica, Mediaset, Piaggio, Pirelli and Segafredo to apply for support in The Netherlands were these companies are registered and pay tax instead of Italy where these companies are originally from but don't pay tax. In practice, however, these companies employ far more people in Italy than in The Netherlands and so the Italian government can't risk the economic damage of such an approach.

  5. m-k

    already hard at work on new schemes that get around the G7 proposal

    Something tells me they're already several steps ahead, with plans B, C, D, and all the way down. Not that they have to hurry, given how long it's taken the G7 to come up with this plan (PLAN!). Before they implement it, before they realize they missed the new clever idea that's also, but of course, perfectly legit, before they decide to consider thinking about countermeasures...

    1. Jedit Silver badge
      Stop

      "consider thinking about countermeasures..."

      Why would corporations need countermeasures? There's already a built-in loophole centring on margins that will allow Amazon to go completely untaxed.

  6. Anonymous Coward
    Anonymous Coward

    "[...] to set rules for digital currencies before any non-state entities have a crack at disrupting money [...]"

    That already happens. So-called "gift cards" or vouchers are effectively digital. They can only be used for limited types of goods. They are also usually time-limited - and often forfeit any residual if a purchase is less than the full amount remaining. Too often the supplier goes into administration, possibly like a phoenix, and the remaining card value becomes zero.

    1. Shalghar Bronze badge

      Define "currency" ?

      There are tons of digital pseudo currencies already loose in the world.

      Nearly every Game company uses pixel currency, bought with real cash to lock in funds and remove any kind of real responsibility, as the transactions only describe the purchase of your pixel gold and not if you are ever getting something useful from it, nor if the game it is used for still exists or if the digital whatevers you buy actually work at all.

      Other corporate digital currencies are the aforementioned vouchers, effectively binding formerly "free" money to the company - often with expiry periods or even hefty "processing fees" if you want to get unused money back.

      You also cannot exchange a voucher for amazon with one for google or thalia nor vice versa. Its locked money after purchaseing the voucher, terms and measly conditions apply.

      What about those payment vouchers for steam,xbox, apple and google ? Also lock in money, never to be used again outside the walled gardens.

      E-Money is another such voucherism. Digital pseudomoney locked in to pre defined or "licensed" purchases. This thing is used in germany for payment of tax free bonuses of around 44 Euros per month by companies as Edenred (using the credit/debit card infrastructure from master card/maestro) and effectively limits what kind of items you can buy with it. The voucherism even gets more insane as you can (at this time, might mutate again) use this "e-money" to buy a voucher from media markt (consumer electronics shop) to then buy whatever you want there.

      Paysafecard anyone ? Paypal ? All not "digital" ? All not under total company and not much state control and scrutiny ?

      Nice to see that the head(les)s of state already seem to have heard of digital currency, too bad the already existing ones are on the unregulated loose since years and decades.

      Whatever digital currency exists, the one most important rule must be that it can be exchanged back into real "free" money without any hindrance or processing fee.

      1. Adelio Silver badge

        Re: Define "currency" ?

        Anyone who uses these fake currencies deserve EVERYTHING that they get.

  7. steviebuk Silver badge

    As mentioned in the Private Eye (but not about this story)

    His wife's family IT business Infosys is now worth £500million. He has a blind trust and they apparently have an eight figure property holdings. They could be close to £600 million.

    But he refuses to move on a wealth tax system and said the UK already has a "very progressive tax system". Yeah because it helps him and his family keep their fotune.

    And he stands on the stage trying to make out he's done something good here and made a change for the world.

    Fuck off.

    1. Anonymous Coward
      Anonymous Coward

      Re: As mentioned in the Private Eye (but not about this story)

      It's not entirely clear from you post who you are referring to. From the clues, I guess it's Rishi Sunak?

      1. steviebuk Silver badge

        Re: As mentioned in the Private Eye (but not about this story)

        For some reason I forgot to add that it is Rishi Sunak. Annoyingly too late to edit.

  8. Porco Rosso

    Where are the min taxes for NGO's & Religion corporations ?

    Question ... how much fiscal engineering does an multinational retailer as Oxfam do ? At least I guess it receive a lot of local Tax money for its different local "noble" projects here and there ... It must be, other wise how can you pay the rent of all these shops in top places around the world and to pay all of its many many marketing campaigns for its political views ...

    1. Grease Monkey Silver badge

      Re: Where are the min taxes for NGO's & Religion corporations ?

      Do you really think that the likes of Oxfam are making even 1% of 1% of what the likes of Amazon make?

  9. Grease Monkey Silver badge

    10% margins

    The devil as ever is in the detail. And of course the detail the devil is hiding in on this occasion is that these taxes will only apply on margins above 10%.

    As has already pointed out Amazon work to a margin of 6.5% most of the time so they will still be exempt from paying taxes. And I'm pretty sure most of the rest of these companies can manage to cook the books to ensure that their margins at least appear to be below 10%.

    The end result is that the G7 leaders get to look like the good guys for a while at least. And in a year or too when the headline start "Facebook and Google Still Paying Zero Taxes" the G7 leaders will respond "are we still talking about that?"

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