Global Profit Tax

Discussion

Ben Chu:

" Related articles

   Google boss Eric Schmidt may snub David Cameron over company's House of Commons grilling

   Ben Chu: Let's not get bamboozled by Google in the global tax avoidance debate

   ActionAid says tax loophole will cheat poor countries out of £4 billion

   Why austerity-struck Ireland is back in favour

   Corporate tax avoiders face global crackdown

Ads by Google

   ทดลองฟรี เว็บพร้อมใช้
   คุณทำได้เองง่ายๆ เปิดได้ใน 5 นาที ดูบนมือถือก็ได้ ทดลองฟรี สมัครเลย!
   www.ReadyPlanet.com
   GPS นำทางถูกที่สุด 2,xxx฿
   จอHD+3D ยอดขายอันดับ1 ถูกสุดๆลด 50% ส่งฟรี+เก็บเงินปลายทาง+ของแถมมากสุด
   www.GPS4Car.com/อันดับ1ในไทย3ปีซ้อน
   Import FrontPage Pages
   Adjust FrontPage Designs Easily ! Drag & Drop with THE HTML Editor
   www.coffeecup.com

Suggested Topics

   Search Engine
   Intellectual Property
   Drugs
   Management Accounting
   Bermuda (uk)
   Cayman Islands
   Information Technology
   Retail
   Tax

The cascade of revelations in recent months showing multinational companies doing a huge amount of business here and yet paying virtually no corporation tax has provoked widespread public demands for something to be done. But people tend to be rather hazier on what that "something" should be.

To define a solution we first need to grasp the nature of the problem: a global tax loophole. In our age of liberalised cross-border trade and free capital flows, multinational companies find themselves with a considerable level of freedom to choose where they pay tax on profits.

With some sophisticated planning from their accountants, many of these corporations (especially those whose commercial value is derived from a piece of intangible intellectual property such as a search engine algorithm or a drug patent) are able to register their profits in tax havens.

Here's how it works. A multinational typically registers its intellectual property in a subsidiary company based somewhere like Bermuda or the Cayman Islands. This subsidiary then charges another subsidiary operating in a big customer market, such as Britain, a massive fee for the right to use that intellectual property. So any trading surplus resulting from activities in the large market is offset by the cost of the fee. And then the profits accumulate in the tax haven.

National governments could and should try to put a stop to this egregious "profit shifting" on their own. But a unilateral approach is plainly second best.

The natural solution is to secure an agreement by all the world's governments to tax the profits of multinational firms collectively and to divide up the revenues fairly between them. This division could be based on the amount of business done by the multinational in their various territories as revealed by their turnover and number of employees.

It sounds complicated, but American states have long operated a system designed along these lines known as "apportionment". Another name used is "unitary taxation". Those names are a bit of a turn-off to the layperson. What's required is a reform banner that the general public can easily understand. I suggest: "Global Profit Tax". After all, doesn't it make sense that global companies should be compelled to pay global taxes?" (http://www.independent.co.uk/news/business/comment/heres-a-solution-its-time-for-a-global-companies-to-pay-a-global-profit-tax-8622283.html)