updated 12:21 pm EDT, Fri July 19, 2013
Could restore lost tax revenue
Presenting at the ongoing G20 summit in Moscow, the Organization for Economic Cooperation and Development has revealed a 40-page plan meant to undo tax avoidance schemes used by companies like Apple and Google. Multinational corporations will use strategies such as dumping patent rights into shell companies, or claiming interest deductions in one country without reporting taxable profits in another. The proposal would develop rules over the next two years to counter the schemes, and force companies to detail where they report their income.
The director of the OECD's Centre for Tax Policy, Pascal Saint-Amans, refers to one of the tax avoidance strategies as "double non-taxation." Apple in particular is known for using a method called the "Double Irish," which involves setting up two companies in Ireland -- one to hold intellectual property rights, and another to license the rights without turning a high profit. The second company is taxed at a rate of just 12.5 percent, a shadow of the 35 percent international tax rate some businesses might otherwise owe the US.
In the long run, the goal of the OECD proposal is make it harder for companies to hide profits offshore. Apple has an estimated $100 billion or more in offshore cash reserves; it has said it wants to repatriate that cash, but only on the condition that it and other corporations can secure a tax "holiday."