July 16, 2013

U.S. blocks plan to close tax loopholes exploited by companies like Amazon, Apple, and Google


I don’t get it.

Last week, there was hope that a series of tax loopholes exploited by multinational companies like Amazon, Apple, and Google would be closed. Reuters reported on a “preliminary draft” of a plan written by the Organisation for Economic Co-operation and Development (OECD) that “identified a number of specific profit shifting schemes,” which included:

“Domestic and international tax rules should be modified in order to more closely align the allocation of income with the economic activity that generates that income,” the draft said, echoing comments from politicians in the United States and Europe in the past year…

The draft plan aims for OECD members and non-OECD G20 members to agree on specific changes to international tax rules in one to two years — fast by the standards of international tax diplomacy.

Among the areas the draft said the OECD would seek to address are situations where companies avoid creating a taxable residence in a market where they have major activities.

The OECD’s plan is expected to be presented to representatives from G20 countries later this month.

Tax avoidance was a major theme at last month’s G8 conference, where leaders from the world’s wealthiest countries pledged action (though provided few specifics). France and Britain have generally led the movement, though after the conference Gavin Hayman, the director of the anti-corruption organization Global Witness, told Reuters “The credibility of this depends on the ability of the White House to advance legislation.”

Well, it looks like that’s not going to happen. An overhaul may be badly needed, but the U.S. government seems to have no interest in overhauling much of anything. As The Guardian reported yesterday:

Senior officials in Washington have made it known they will not stand for rule changes that narrowly target the activities of some of the nation’s fastest growing multinationals, according to sources with knowledge of the situation…

While the Americans concede that the rules need to be updated, they are understood to be pushing for moderate change. They are believed to want tweaks to the existing wording of international tax treaties rather than the creation of wholly new passages dedicated to spelling out how the digital economy should be taxed.

Look, I’m all for messing with the French (because it’s hilarious), but since pretty much everyone agrees that amending international tax law is badly needed and that it’s possible an opportunity like this, in which several nations are in agreement, will never exist again, this is very disappointing. For now, it looks like tax loopholes won’t be closed without American intervention and, unfortunately, the U.S. is interested in symbolic, rather than meaningful, alterations.


Alex Shephard is the director of digital media for Melville House, and a former bookseller.