It’s time to make Google, Apple and other multinational companies pay more taxes. That’s the message President Barack Obama and the leaders of the world’s top economies sent to cross-border giants at a summit ending Friday.
The new rules on taxes would make it harder for companies to hide profits in tax havens and force them to pay tax in the countries where they make money. The G-20 leaders also agreed to an unprecedented deal to share information on individual taxpayers, despite earlier resistance by China.
Low tax payments by major global companies such as Google or Amazon have sparked public anger in Europe as countries struggle out of recession.
The G-20 countries said in a communique Friday that they will aim to set up a system so that profits would be taxed “where economic activities deriving the profits are performed and where value is created.”
The leaders also said they expect to begin exchanging information automatically on tax matters among G-20 members by the end of 2015.
But leaders may face political battles at home in getting the new tax treaties and laws in place. Advocacy groups say that poorer countries should also be involved, so that the world’s neediest also benefit from more government tax dollars.
French President Francois Hollande called the deal “perhaps the most important” agreement reached at this year’s G-20 summit.
OECD chief Angel Gurria said Friday that it’s crucial that Internet giants like Google and Facebook are covered by the new rules.
“You’ve got to get the big guys to make a contribution,” Gurria said. Otherwise, he said, “what are the treasurers, the ministers of finance left with? Medium and small-scale enterprises, the middle class to tax?”
The OECD is designing the new global tax rules and has come under fire from cross-border corporations that say they’re being unfairly targeted. But OECD officials say some companies are starting to recognize that their moves to register in low-tax jurisdictions such as Luxembourg or the Cayman Islands are causing public pain.
Gurria insisted that the tax plan isn’t anti-business.
“We don’t want to discourage companies from creating jobs. But we obviously don’t want to encourage companies to take away the profits and squirrel them away and not share them with anybody else,” he said.
The plan includes ways to close loopholes and allow countries to tax profits held in offshore subsidiaries. The measures would target such practices as deducting the same expense more than once, in more than one country.
The plan also has a special focus on the online economy, where commerce flows across borders constantly, and it’s harder to tie revenue and profit to a single country.
Earlier this year, an influential committee of British lawmakers issued a scathing report that said Google made highly contrived arrangements serving no purpose other than to avoid paying full taxes.
Google argues that its practices are legal and transparent, and that the overwhelming majority of sales actually occur at the company’s European head office in Ireland — where corporate tax rates are much lower than Britain.