G20 Works to Eliminate Lucrative International Corporate Tax Loopholes
Offshore tax havens are about to become a thing of past. Now a popular scheme in corporate financial planning, often explicitly complex corporate financial structures are created that multifariously expand between numerous different countries, and that offer lucrative tax havens emboldened by known tax loopholes that are taking advantage of by witty multinationals seeking to reduce overall tax liability. This method, however, is now being addressed by the G20 summit, as these industrial superpowers seek a more proficient means of procuring more tax dollars out of multinationals that have unabatedly evaded paying them in the past.
In lieu of recent news reports that showed that prominent multinational corporations such as Apple, Google, Amazon, Facebook and Starbucks had evaded paying billions of dollars in taxes over the past several years, the G20 is stepping things up to ensure that these entities are forced to pay the taxes that they owe in the respective regions that they are centered.
“National tax laws have not kept pace with the globalization of corporations and the digital economy, leaving gaps that can be exploited by multinational corporations to artificially reduce their taxes,” the Organization for Economic Cooperation and Development stated in an announcement this past week.
OECD, which is based out of Paris, France, has created 15-part plan that they plan on introducing this week during the G20 summit. The plan will effectively close advantageous tax loopholes that previously allowed entities to create havens in offshore subsidies and pay a lower tax rate on them. When implemented, and if approved, the plan would be put into place over the next two years, and would target unscrupulous practices like double deductions in multiple countries.
Following the economic turmoil that has ensued over the past five years, the OECD has spearheaded efforts to crack down on the globalized evasion of taxation by multinational corporations. Still, no prominent progress has been made, and untold amounts of entities still take advantage of these offshore tax loopholes and havens. Some countries in Europe have resisted such efforts, seeing the opportunity to offer lower corporate tax rates as advantageous to bringing more business and opportunity to their nations.
Former U.N. Secretary General Kofi Annan has repeatedly asked the G20 summit to review these harmful tax evasion policies, stating that he opposed “the corrosive effects of unfair tax practices.”
“Something is indeed gravely amiss when multi-billion dollar companies are paying a lower rate of tax than the citizens from whom they derive their profits,” he wrote in a recent summary.