What is the impact of the OECD’s implementation of international tax reform?

Xinhua News Agency, Paris, October 10th (International Observation) What is the impact of the OECD’s implementation of international tax reform

Xinhua News Agency reporter Xing Jianqiao

The Organization for Economic Cooperation and Development (OECD) announced in Paris a few days ago that 136 countries and jurisdictions have agreed to reform the international taxation system and will levy at least 15% corporate tax on large multinational companies from 2023 in order to cope with the economy. Taxation challenges brought by digitalization.

Some analysts believe that the reform of the international tax system can help avoid tax evasion and tax avoidance by large multinational Internet companies, but it may also affect the economic strategies of some developing countries and smaller developed countries to attract foreign investment, triggering a reduction in foreign investment and affecting their economic development. .

The OECD’s plan this time is to redistribute the taxation rights of multinational corporations’ profits and establish a two-pillar inclusive framework for the establishment of the lowest effective global tax rate. The organization said that Pillar One of this program will ensure that the profits and taxation rights of the largest and most profitable multinational corporations are more equitably distributed among countries. The new rules require multinational companies to pay taxes in the country in which they operate, not just where their headquarters are located. The second pillar is to set the global minimum corporate tax rate to 15%. Starting in 2023, companies with annual revenues of more than 750 million euros (approximately US$870 million) will apply this tax rate.

The OECD said that after the implementation of the program, more than 125 billion U.S. dollars of profits from about 100 large multinational corporations around the world will be redistributed to countries.

Analysts pointed out that after the implementation of the global minimum corporate tax rate rule, the motivation of multinational companies to transfer their profits to low tax areas or “tax havens” will be significantly reduced.

Michael Deverrow, a professor of tax research at the University of Oxford in the United Kingdom, once estimated that 78 of the Fortune Global 500 companies will be affected by the Pillar One rule, including 37 American and European companies.

Remy Bourjo, a researcher at the French Institute of International Relations and Strategy, told Xinhua News Agency that the taxation of profits after a country generates turnover and a minimum corporate tax of 15% will prompt large multinational companies to redirect their investments. .

In recent years, while making high profits globally, multinational Internet companies have been accused of using loopholes in the current international tax system to avoid taxes.

In the late 1980s, technology companies such as Google and Apple invented a tax avoidance strategy commonly known as the “Double Irish-Dutch Sandwich” in the industry, which is to transfer part of their European operating income to branches in low-tax countries such as Ireland or the Netherlands. Institutions then pay taxes. For a long time, European countries such as France have been dissatisfied with Internet giants using loopholes in EU tax law to avoid taxation.

Burrough believes that the new tax system will prevent countries with relatively small economies like Ireland from continuing to attract multinational companies with lower tax rates.

The Irish corporate tax rate is 12.5%, which is where the European headquarters of some Internet giants are located. Irish Minister of Finance, Public Expenditure and Reform Pascal Donohue previously stated that the implementation of international tax reforms could cause Ireland to lose 20% of the tax revenue of multinational corporations.

In addition, some countries and international institutions also expressed dissatisfaction with the 15% minimum corporate tax rate stipulated in the new plan. Argentina’s Minister of Economy, Martin Guzman, recently stated that developing countries are forced to choose between “bad and worse (plans)”.

Susanna Ruiz, head of tax policy at Oxfam, an international rescue organization, said: “The legitimate concerns of developing countries are ignored. The proposed 15% tax rate will benefit rich countries and increase inequality.”

Gary Huffbauer, a senior researcher at the Peterson Institute for International Economics, previously stated that the establishment of the world’s lowest corporate tax rate deprived some countries of the policy space to use low tax rates to attract investment from multinational companies, especially for those economies that have no other means to attract foreign investment. To be fair, international financial institutions such as multilateral development banks should consider helping these economies.

(Editor in charge: Ma Changyan)

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