The issue of corporate taxation has taken center stage in many policy-makers’ minds across the world, yet difficulties in agreeing on a solution seem to have resulted in an effective “paralysis.”
According to PwC and OECD data cited by The Economist, the global average corporate income tax as a share of profits is continuing to drop precipitously. From an average of over 19 percent in 2004, the figure had dropped to roughly 16.5 percent by 2012. As a percent of GDP, the average revenues from corporate income tax for the OECD rose to a high of just over 3.5 percent in 2006 before falling in the recession to approximately 2.25 percent. This figure did recover by 2012 to just below its 2004 level of about 2.8 percent.
In response, the 2012 G20 called on the OECD to find consensus as to how to close the loopholes in international tax standards that multinationals exploit to lower their bills, according to the news source. After two years, the OECD presented its plan to the 2014 G20 on Sept. 20 for approval, which it received.
The proposal attempts to curb a number of practices and is to be followed by a second part next year. Practices that would be banned or curbed include “transfer pricing,” by which multinationals shift profits to low-tax countries by charging fees between different subsidiaries they own, and “hybrid mismatching,” which allows companies to claim double deductions by classifying financial instruments as debt in one country and equity in another. Additionally, it would allow member countries to share information about multinationals’ assets, sales, profits, etc among other measures.
Unfortunately, the next stage is genuinely much harder, according to The Guardian. Agreeing to a measure at the G20 is one thing – expecting every OECD country to embed the measures into the more than 3,000 tax treaties of global trade is quite another. Clearly, many countries are dedicated to ending the “race to the bottom” that has characterized global corporate tax policy issues over the last several years, but the current measure should be considered with some skepticism.
Section 363 Sales in Bankruptcy: What Businesses, Lenders, and Buyers Need to Know
When a company enters Chapter 11 bankruptcy, many assume the process will culminate in a lengthy reorganization plan. However, distressed businesses are increasingly being sold through a different mechanism — a sale under Section 363 of the United States Bankruptcy Code. A Section 363 sale allows a company, as a debtor-in-possession in bankruptcy, to sell […]
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For parents of a child with a disability, estate planning raises concerns that go well beyond deciding who will inherit their assets. Parents may spend years making sure their child has the right care, services, and support. Eventually, they must also confront a difficult question: Who will take over when they can no longer do […]
What Every Real Estate Investor Should Know Before Buying a Rental Property
Before buying a New Jersey rental property, an investor should verify realistic operating numbers, the property’s legal and regulatory status, lead-based paint and flood compliance, the existing leases and tenant protections, and the right ownership structure. A rental property is more than a piece of real estate; it is an operating business subject to legal, […]
Can You Change an Irrevocable Trust in New Jersey?
In New Jersey, an irrevocable trust can sometimes be modified even though its name suggests otherwise, and one of the primary tools for doing so is a process called decanting. Whether decanting is available depends on the specific terms of the trust and the discretion given to the trustee. Key takeaways: New Jersey has no […]
How Intellectual Property Valuation Will Impact Business Transactions
Intellectual property valuation determines the monetary value of a business’s IP assets, and it drives outcomes in licensing deals, joint ventures, mergers and acquisitions, financing, and ownership disputes. The most valuable assets of a business are often the things that cannot be seen or touched: a proprietary process, a copyrighted work, brand recognition, or the […]
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