International technology companies should stop considering it their “duty” to employ tax-dodging strategies, said Angel Gurria, head of the Organization for Economic Cooperation and Development.
Governments must make it harder for firms to get around tax laws or small businesses and individuals will suffer, Gurria told a conference in Brussels today.
“The options for leaders are very simple: if you cut tax on big guys you are left with the middle classes and the small guys to tax,” Gurria said. “We’ve had very famous cases where some IT companies went to the Commons in the U.K., or the very famous visits to the United States Congress, to confirm that not only do they not pay taxes, but that they find it their duty not to do so.”
As governments have looked for ways to cut deficits in the wake of the debt crisis, they have turned to tackling tax avoidance as a way of boosting revenue. The Group of 20 major economies has endorsed a plan, proposed by the Paris-based OECD in July, for cracking down on tax-avoidance strategies used by companies such as Google Inc. (GOOG:US), Apple Inc. (AAPL:US) and Yahoo! Inc. (YHOO:US)
The U.K. Parliament has held hearings since November 2012 on corporate tax dodging, examining tactics used by information-technology companies and others such as Starbucks Corp. (SBUX:US) In May, the U.S. Senate held a hearing on Apple Inc.’s offshore tax policies. The companies all say they’ve complied with international tax laws.
“It’s not about enforcing the law; it’s about changing the law,” Gurria said. “We created the conditions in the law over 70 years of worries about double-taxation. We’ve created the perfect double non-taxation regime and it’s legal.”
The OECD, an international economic organization supported by 34 member countries including the U.S., U.K., Germany and Japan, will publish the results of its research on the issue for governments to consider within the next two years, Gurria said.
Its blueprint suggests trying to keep companies from putting patent rights into mailbox companies or taking interest deductions in one country without reporting taxable profits in another. Another idea would require companies to disclose to regulators their income in subsidiaries around the world.
“Middle classes are being screwed by the system; SMEs perceive themselves as being screwed by the system,” European Parliament lawmaker Philippe Lamberts told the conference. The OECD’s efforts to take on the biggest companies are “truly revolutionary,” he said.
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