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.
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public
Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]
Understanding Chattel Paper: A Key Component in Secured Transactions
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
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