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Article updated: 9/6/2013 7:37 AM

World leaders push big companies to pay more taxes

U.S. President Barack Obama walks with Germany’s Chancellor Angela Merkel, left, and Australian Foreign Minister Bob Carr prior to the group photo at the G-20 summit at the Konstantin Palace in St. Petersburg, Russia.

U.S. President Barack Obama walks with Germany's Chancellor Angela Merkel, left, and Australian Foreign Minister Bob Carr prior to the group photo at the G-20 summit at the Konstantin Palace in St. Petersburg, Russia.

 

Associated Press

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By Associated Press

ST. PETERSBURG, Russia -- It's time to make Google, Apple and other multinational companies pay more taxes. That's the message from President Barack Obama and the leaders of the world's leading economies at a summit ending Friday.

The head of the Organization for Economic Cooperation and Development told The Associated Press that the leaders have signed up to an ambitious new tax plan at the Group of 20 summit in St. Petersburg, Russia.

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The new rules, unveiled by the OECD and debated by G-20 finance ministers in July, would make it harder for companies to hide profits in tax havens and force them to pay tax in the countries where they make money. The leaders also agreed to an unprecedented deal to share information on individual taxpayers, despite earlier resistance by China.

But it may take years to get the new tax treaties and laws into place. And advocacy groups say poor countries should also be included, and warn that big companies may try to pressure governments to slow or dilute the new tax rules.

"You've got to get the big guys to make a contribution," OECD chief Angel Gurria said. Otherwise, he said, "What are the treasurers, the ministers of finance left with? Medium and small-scale enterprises, the middle class to tax? Well, that has a limit."

The OECD is designing the new global tax rules and has come under fire from cross-border corporations that say they're being unfairly targeted. But OECD officials say some companies are starting to recognize that their moves to register in low-tax jurisdictions such as Luxembourg or the Cayman Islands are causing public pain.

Low tax payments by major global companies -- including Google, Amazon, Facebook and Starbucks -- have sparked public anger in Europe recently, as governments there are struggling with high debts, low growth and austerity measures.

Gurria, speaking in an interview at the G-20 summit on the shores of the Baltic Sea, insisted that the tax plan isn't anti-business.

"We don't want to discourage the companies from creating jobs. But we obviously don't want to encourage companies to take away the profits and squirrel them away and not share them with anybody else," he said.

He said Apple borrowed billions of dollars to pay dividends instead of bringing their profits back to the United States, because they would have had to pay a third of the profits in corporate taxes

"Tax laws ... seem to favor this exodus and therefore we really have to take a look at the general principles," and bring down the overall burden, he said.

The timetable will depend on national legislation, but OECD officials are pushing for it to be in place by 2015.

The plan includes ways to close loopholes and allow countries to tax profits held in offshore subsidiaries. The measures would target such practices as deducting the same expense more than once, in more than one country.

The plan also has a special focus on the online economy, where commerce flows across borders constantly and it's harder to tie revenue and profit to a single country.

Earlier this year, an influential committee of British lawmakers issued a scathing report that said Google made highly contrived arrangements serving no purpose other than to avoid paying full taxes.

Google argues that its practices are legal and transparent, and that the overwhelming majority of sales actually occur at the company's European head office in Ireland -- where corporate tax rates are much lower than Britain.

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