The Blame Game: Multinational Taxation in an Era of Knowledge

U.S.-based companies such as Google, McDonalds, Starbucks, Apple, and Mi-crosoft are being attacked by European politicians for not paying their fair share of taxes. For example, in March 2014 Google was hit by a French tax assessment of perhaps as much as a billion euros according to press reports at the time. In November 2014, U.K. lawmakers accused Google, Amazon, and Starbucks of us-ing convoluted accounting methods to reduce their tax liabilities.

Indeed, the feeling that U.S. multinationals—especially digital giants—are ‘getting away with something’ has fueled a concerted effort by developed countries to re-write the global tax system. This so-called BEPS project (for Base Erosion and Profit Shifting), organized by the OECD, is in the process of issuing a series of guidelines for how countries can revamp their tax codes to best capture “stateless income.”

However, these accusations of tax avoidance are, in reality, not as clear-cut as they seem. Certainly some companies are taking advantage of legal but blatant loopholes that make no economic sense. Eliminating such loopholes is an im-portant part of the BEPS project that we support.

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