US President Joe Biden’s global corporate tax reform plan is expected to do little to help countries in need of more tax revenue in developing economies that are lobbying for greater power over multinationals.
Washington’s ambitious proposal The 100 largest companies in the world will earn enough revenue in countries that have little or no physical presence to benefit them and will introduce a minimum tax rate worldwide, where it will be called a “downward race”! Businesses are channels of profit through low-tax jurisdiction.
But companies will pay their taxes in most of the countries where they are headquartered, and even their profits – and in many cases labor and raw materials – are collected from developing countries, a senior diplomat and lobby group told the Financial Times.
They further expressed concern that many developing countries were not participating in the negotiations on the OECD proposal and feared that the final agreement would be less likely to reflect their interests.
Matthew Gabonzubola, Nigeria’s ambassador to the OECD, said: “With what I understand. . . As a rule, developing countries are not getting anything. “
He supported the efforts of the US and OECD to get the largest companies in the world Pay more taxes worldwide. “The less tax incentives developing countries give, the more they are able to maintain the revenue needed for their development and they rely less on remittances or assistance,” he said.
However, he warned that “countries of origin, developers or developers should have the right to deny before it is both logical and ethical.” [tax revenue] Pass [companies’] Country of residence “.
Gabonjubola added that the United States “did not provide economic reasoning” to target only 100 companies. This focus is a scaling-back of OECD proposals, covering thousands of businesses.
“The most important difference between developed economies and developing countries is the polarity that determines how many companies are included,” said Siebel Galven, Mexico’s ambassador to the OECD.
Rajat Bansal, a member of the expert committee of the UN Committee on International Cooperation on Taxation, said that simply installing a magnet that would occupy the largest companies would mean “in the end, most of the potential taxpayers will not be covered.”
Critics also said that the amount of tax collected under the US plan is too low because it is likely to be less than one-fifth of the company’s profits. Roberton, BDO’s international tax partner, said: “If the overall pot is not enough. . . It fails to provide fair rewards from outside businesses [developing countries’] From the regions that benefit [their] Economy. “
The African Tax Administration Forum, which advises governments on the continent, has called for a two-pronged approach to lower margins for small economies. “We don’t think that one dimension is fair for all economies,” it says.
The ATAF is further concerned that in long and complicated negotiations poor countries may not be able to fight for their rights. “Even though they put a seat on the table, it’s hard for them to keep it. . . There may not be a high level of political awareness in Africa on this issue and how important it is [the proposal] Is
Several large developing economies are involved in a competitive effort to develop an international tax discipline at the United Nations, which will specifically target digital service companies. The move is centered around the small amount of tax paid by U.S. technologists in countries where they make big profits.
The plan would allow countries to grant tax rights based on the income of digital companies based solely on the residential area of the company where the revenue would be earned. According to the ATAF, Argentina, India, Kenya and Nigeria have all recently introduced digital tax and several countries in Africa are considering it.
The UN resolution, which defeated India and Argentina, was briefly approved by the UN tax committee last month. Other developing countries, including Ecuador, Ghana, Liberia, Nigeria, Vietnam and Zambia, have expressed support.
The model is non-binding and can only be applied to bilateral agreements if participating countries sign up for it, but the timing is problematic for the OECD.
“There seems to be a strange competition going on between the UN and the OECD,” said Tov Maria Riding, the European Network’s policy and advocacy manager for education and development. “The United Nations is looking at developing digital services taxes and the OECD is trying to get rid of them,” he said, referring to a government that applies to all industries.
For some developing countries, the feeling of moving away from OECD negotiations may make them reluctant to abandon their plans to target tech companies, which could lead to stagnation, said Christian Hallam, a senior tax and extraction specialist at Oxfam Ibis in Copenhagen. “There is a real risk that rich countries will determine the outcome [OECD] Process, we’ll see what it is. “
Mexico Galvan says the OECD talks were “difficult but constructive” and that several large developing economies “certainly favored a common one.” [tax] Framework “.
But others have warned that the US proposal could lose its legitimacy.
“You can call the rules global, but if the decision-making isn’t really global, why would countries that weren’t involved in drawing up the rules sign up for it?” Riding says. “The poorest countries in the world are at risk of losing again after the global tax pie splits, even though they need more tax revenue than anyone else.”