Earlier this month, the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) announced a “significant agreement” on global tax sentiments. It imposes at least 15% taxes on international organizations. It wants to stop “global competition” from corporate taxes. Or at least, to slow down.
Prior to the move to “tax hikes”, the G7’s corporate taxes currently range from 19% in the UK to 32% in France. It is 21% in the US.
More importantly, this means “legitimate” taxes – companies that can pay in a world without accountants, expensive lawyers and hospitality.
What do corporations pay for taxes? Good question. There are no right answers. No one knows and everyone lies.
Corporate taxes are no longer as public as they are private. However, corporate claims include taxes and debts. In late 2019, the Institute on Taxation and Economic Policy (ITEP) published a survey called Corporate tax Revenue in the First Year of Trump’s Tax Law, and provided an overview of profitable corporate taxes in 2018. In this study, ITEP researchers analyzed Fortune 500 company files and identify 379 companies that were profitable and that provided enough information to calculate federal tax rates. It was found that these companies pay a “government subsidy tax of 11.3%” slightly more than half of the “established tax” of 21%. It was also found that 91 of these companies, including Amazon, DRM, Halliburton and IBM, did not pay any government taxes. While some 56 companies “paid utility taxes between 0% and 5%”.
These results are no different from 2018. In 2020, according to Forbes, 55 out of Fortune 500, including Nike, FedEx, Netflix, Molson Coors, Levi Strauss and Starbucks (with a profit of $ 4,774,000,000), did not receive a state tax.
It is very important that the tax-deductible taxes contained in the ITEP report are “significantly affected by very few corporations”. He also loves the world’s richest people. With some of the systems that allowed Jeff Bezos to pay state taxes in 2007 and 2011, George Soros did not pay anything for three consecutive years from 2016 to 2018 and Michael Bloomberg has a 1.30% tax rate between 2014 and 2018.
Why, then, is the G7’s request, if it is a global agreement, to introduce “practical” taxes?
It leans sideways.
One of the great things about tax evasion – especially for large corporations – is that the business they do in a tax-exempt country is actually happening in a country with low prices. Just think of what sells best in countries like the US, Germany, and Japan, but profits from these trades – through accounting – have moved to Ireland or Hungary.
If the G7 can bring the world at a lower rate of 15%, it will begin to close the gap between the countries where goods and services are actually sold and those who call themselves “hiding holes”.
In addition, under the new G7 agreement, “countries where corporate assets are consumed will have the right to levy 20% of profits above the 10% threshold”. This may make it possible for large corporations to avoid paying taxes by “moving” their business to more secretive countries.
But big companies still have ways to avoid getting involved in this.
For example, Amazon’s profit is projected to be 6.3 percent in 2020. This is not uncommon for “sales”. (Please note, this means less money. Bn. But with a “profit” of 6.3% he could escape the G7.
The solution to the G7’s problem is to look at areas where the company has significant profits – such as Amazon’s electricity services, about 30% – as opposed to low-cost areas. False things are true, but they show awareness of the problem.
The G7’s “old testament” on global tax ideas is a mere figment of the imagination. The seven member states cannot solve this problem on their own. This alliance requires significant participation. The goal now is to take them to the G20. The group includes some of the world’s most important economies, such as China, India, Russia and Brazil. But in addition to reaching out, G7 leaders also need the plan approved at home. Will Biden’s administration, for example, be able to accept the deal through the Republican Parliament which has promised to ban everything and everything it does?
The brief list above of billions of taxpayers may seem overwhelming. And more than that. That is to say, the difference between producing good words and actually doing the right thing. Bezos, Soros and Bloomberg have all said they will support higher taxes on the rich and corporations. However, when it comes to taking action, they actively seek ways to reduce their pay, or to avoid all costs. The form is very clear: use good accountants to enforce the rules to find errors, spend a lot of money on lawyers to fight this, use mobilizers to write the rules and help them not to do what they did not do.
The G7’s strategic objectives are excellent.
But companies, the “secret” and the richest countries will fight for these good intentions and reap the benefits.
The reason for this is not the purpose of the G7 agreement, but the way in which it is used. And that is still some years to come.
The views expressed in this article are those of the author and do not necessarily reflect the views of the editor of Al Jazeera.
