Home Economics They're Still Not Grasping That the Big Tech Tax Problem Is Over

They’re Still Not Grasping That the Big Tech Tax Problem Is Over

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The European Union has decided to adopt, in limited form this country by country reporting lark. All of which is rather amusing as it rather misses the fact that Donald Trump has already solved the non-taxation whinge. Something Janet Yellen grasps which is why she’s simply shrugging a shoulder over it.

The EU has moved to force multinational companies to publish a breakdown of the tax they pay in each of the bloc’s member states and in tax havens such as Seychelles, piling pressure on the UK government to follow suit.

Country-by-country reporting is designed to shine a light on how some of the world’s biggest companies – such as Apple, Facebook and Google – avoid paying an estimated $500bn (£358bn) a year in taxes by shifting their profits from higher-tax countries such as the UK, France and Germany to zero-tax or low-tax jurisdictions including Ireland, Luxembourg and Malta.

Huzzah, wondrous and so on. Yellen not seeming to care very much:

The Biden administration has shelved the so-called safe harbour clause — pushed by American officials under President Trump — which would have effectively handed technology companies the chance to opt out.

Janet Yellen, the US Treasury secretary, told a meeting of finance ministers from the G20 group of developed nations that it would no longer insist on the proposal. The move, first reported by the Financial Times, has the potential to kick-start talks between 137 nations to update the international tax rulebook for the digital age.

The reason for this being obvious to those of us who understand how the system works.

It used to be that if you could haul your money out of the EU into some Caribbean bank then it sat there untaxed. Well, if you then took it into the US you did pay American corporate income tax – as e-Bay once did to the tune of $3 billion. As, differently, Vodafone did after the fight over profits in Luxembourg. But, let is sit there and not tax was paid.

Which is what all the whingeing was about.

Now matters have changed. The Trump tax reforms mean that the island money still pays tax. Even if it doesn’t go into the US, it now pays tax. So, there’s no real benefit to all the hauling around now.

Further, the American tax bill is whatever US tax should be paid minus foreign taxes already paid. So, if foreign taxes rise the American bill falls. This is of some concern to Uncle Sam, EU finance ministers are interested, but the companies don’t give a damn.

That is, the entire idea of country by country reporting doesn’t change a corporate tax bill any more. It only changes who gets to receive the cheques. Simply because Donald Trump already solved the problem.

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