Can efforts to put new and stricter tax rules on tech and other knowledge companies actually backfire and hurt global growth?
There’s a sense of outrage and worry in Europe that American tech giants such as Google and Apple seem to be beating European rivals soundly. At the same time, governments claim that many global companies—including but not exclusively American tech companies—have been able to game the international tax system to great advantage. Given the need for revenue to support social benefits, that puts global companies in the cross-hairs of policymakers.
In an effort to stop global companies from escaping the grasp of domestic tax collectors, experts at the Organisation for Economic Co-operation and Development (OECD), the Paris-based group of developed countries, are developing a new set of principles for international tax cooperation. This effort, known as the Base Ero-sion and Profit Shifting (BEPS) project, has resulted in a series of documents out-lining some of these new principles, with more to come over the next year
These new principles—called ‘Actions’—are intended to transform the global tax system. As one OECD document says: “The BEPS project marks a turning point in the history of international co-operation on taxation.” (OECD 2013). Moreover, even though international tax policy is generally a matter for bilateral treaties be-tween individual governments—the BEPS project is developing the first multilat-eral “instrument” that would supersede and modify existing bilateral treaties.
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