Western governments look to close tax loopholes used by tech companies


According to European reporters from Reuters that have seen a recent a draft of an action plan compiled by Western governments, a number of countries are setting their collective sights on massive technology companies, including Apple, Google and Amazon, to do away with various loopholes that these enterprises use to avoid paying taxes.

Over the last year, it has been brought to light that major tech companies have been taking advantage of structures in tax systems that allow them to reduce the amount of money they pay to government organizations, rather dramatically in some cases.

For example, in May, a U.S. Senate committee called out Apple for being registered in Ireland but “managed” (i.e. actually run in) the United States, meaning they weren’t qualified as a tax resident in either country. Meanwhile, Amazon has been using “specific activity exemptions” to run its retail business in European countries like Britain or Germany without having to pay taxes in either of them.

The Organization for Economic Co-Operation and Development (OECD) is basically an advocacy group that advises a lot of wealthy first-world Western countries, and it is also the organization that a G20 group of countries has tasked to come up with a way to stop big companies from maneuvering their profits into tax shelters. The OECD is expected to present an action plan to the G20 group later this month.

It should be noted that none of these companies are directly accused of breaking any laws, merely that they were taking advantage of tax loopholes already legally in place in all of these countries. The OECD’s job is to find ways to reduce or minimize the effects of these loopholes to ensure that each government makes the most revenue as possible.

[via Yahoo! News]

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  • Ashraf

    There will always be tax loopholes as long as it is public policy to use tax incentives to induce certain types of behavior. Loopholes will never go away.

  • Machar

    As I’ve posted here before, the first country that needs to put its house in order is the USA. Obama is at the head of a long queue of international leaders whinging about ‘lost’ taxes, yet there are four states in the USA acting as tax havens, most notably Delaware. Or so the NY Times claims anyway:

    Personally, I attach very little blame to the companies concerned (they are, after all, run by mindless, avaricious bean counters and corporate lawyers) and put responsibility firmly at the door of the countries doing all the moaning (whose laws favour companies run by mindless, avaricious bean counters and corporate lawyers – or MABCCLs). For the most part all they have to do is change a few laws in order to close the so-called ‘loopholes’. Of course that would negatively affect all those MABCCLs, many of whom are related to the people responsible for making the laws.

    As for the small countries that have low, or zero, taxes, surely it’s obvious that most have no other way to attract investment and/or high capital residents? Lay off the small guys and stop throwing stones whilst living in glass houses! The real criminals – money launderers and the like – don’t originate in the small countries. They are the product of large economies, the ones who should be acting responsibly in the first place.

    Sheesh, I hate big bullies!

  • Mike

    These companies hire lawyers who charge $500-$1000 per hour to find these totally legal loopholes, saving the companies many, many fold this expense. Perhaps the governments should be doing the same in reverse–the governments will take in many, many fold the expense.