The OECD on Wednesday unveiled a series of proposals to force global companies to pay more taxes, reversing decades of rules that let them shift profits between countries to lower their tax payments.
If the proposals were to go into effect, countries would be able to tax a proportion of a company’s global profits, based on sales within their borders, according to this article in the Financial Times. That would in theory end companies’ ability to move profits around the world to dodge taxes. The proposals would also create a formula to generate a fixed rate of return on local activity when a company has a physical presence in a country, the article says.
Of course, whether the proposals ever go into effect is a big and very open question. There’s a growing sense among national governments that large companies, and especially large U.S. tech companies, are not paying enough in taxes and that a unified approach is the best solution. And, it’s notable that the proposals come from the OECD after months of negotiations—after all this is a club of rich countries that hold a lot of sway over the global economy. Initial reaction from big companies wasn’t all negative, either.
But there’s still a long way to go, and a lot of details to hammer out. So stay tuned, we’ll have a better sense of how good the chances are that the proposals will become policy after they come up for discussion at next week’s G20 meeting in Washington.