Tax justice has been a long established item on the G20 agenda and it is rightly so. Stashing profits offshore may soon become tougher if not impossible to multinational companies, thanks to a strategic plan introduced by the finance chiefs of the leading companies of the world which is rightly aimed at propelling multinationals to pay more taxes. Lower tax payments by Multinational companies – including Google, Amazon, Facebook and Starbucks, have ignited public anger in Europe lately, as the governments are struggling with low growth, high debts and austerity measures that are adversely affecting ordinary taxpayers.
The OECD has worked meticulously to come up with a 15-point plan to cease loopholes and allow countries to tax on the profits held in offshore subsidiaries. Bruno Le Maire, French Finance Minister, was quick to agree upon the agreement, saying it was a once-in-a-century opportunity for reform. He said, “There is no turning back. We are putting an end to the fiscal race to the bottom and the digital giants will now pay their fair share of taxes,”. There are many countries that are pressing for a higher percentage of tax rate. Countries such as – United States, France and Germany. Some members are opposing these, including EU member Ireland, while it lured multinational companies such as Apple and Google to Dublin where it has low tax rates.
Multinationals operate in many countries, oil giant BP is present in 85 countries, for example, but usually pay taxes on profits only in tax domiciles cherry-picked for their low rates and save millions and millions of dollars. This was a very necessary step which was taken by the countries involved to curb multinationals from evading billions of dollars in taxes, affecting the government revenue which in turn is affecting the people. Now the bigger question which arises over here is what happens to the smaller countries which were benefitting from the taxes multinationals paid to them in order to escape paying to countries with a higher tax slab. Will the rich countries do anything to uplift these poorer countries after robbing them of billions of dollars in revenue is something to think upon.