Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

G-20 Finance Ministers Back Plan to Curb Tax Evasion by Large Corporations Companies Such as Apple, Starbucks Have Avoided Paying

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

G-20 Finance Ministers Back Plan to Curb Tax Evasion by Large Corporations Companies Such as Apple, Starbucks Have Avoided Paying

Article excerpt

MOSCOW -- The world's richest economies for the first time endorsed a blueprint Friday to curb widely used tax avoidance strategies that allow some multinational corporations to pay only a pittance in income taxes.

It could be years before any changes take place in national tax laws, and big corporations and other interest groups are sure to lobby heavily to preserve their tax breaks. But the proposal was the most concrete response yet to the intensifying pressure on governments around the world to address the issue.

The governments have strong motivation for change. They are starved for revenue and face citizenry who see inequity in a system that enables some highly profitable corporations to pay far lower tax rates than workers.

In one widely cited example, Starbucks last year paid no corporate tax in Britain despite generating sales of nearly 400 million pounds (about $630 million) from more than 700 stores in that country. Apple, despite being the most profitable U.S. technology company, avoided billions in taxes in the United States and around the world through a web of complex subsidiaries.

In light of such practices -- which are entirely legal, taking advantage of differing tax rules around the world -- the Organization for Economic Cooperation and Development, or OECD, has proposed that all nations adopt 15 new tax principles for corporations. The plan focuses on corporations only and would, if adopted widely, shift some of the global tax burden toward large companies -- the ones big and rich enough to devise complex tax- reduction strategies -- and away from small businesses and individuals, which tend to spend a much bigger share of their incomes on taxes.

The list, presented at a Moscow meeting Friday of finance ministers from the Group of 20 nations with the largest economies, includes ideas to prevent corporations from "treaty shopping" to find nations with the lowest taxes and then find ways to book their profits there, even when much of the money is made elsewhere.

The group recommended strict rules for defining where a company has a permanent presence. It also proposed three measures to limit the practice of so-called transfer pricing -- the shunting of profits and losses between subsidiaries by disguising them as internal corporate payments for goods or, as is increasingly common, for copyright or patent royalties.

Friday's proposal represents a new global commitment to tackle an issue that has drawn an angry outcry in some nations; lawmakers in the British Parliament and the U. …

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