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The OECD’s proposal to allow national governments to tax part of the profits of multinationals on the basis of sales in their countries would generate little additional revenue, according to an independent assessment by the French government.
A simulation carried out by the French Economic Analysis Council, whose mission is to advise the French government, revealed that the evolution of corporate tax revenues would not be substantial for France, Germany, United States and China on OECD proposals to tear up a century of international corporate tax rules. Meanwhile, it would create bureaucratic complexities, the study notes.
France, for example, would benefit from taxing part of the sales of Facebook, Apple, Amazon, Netflix and Google likes at home but would lose part of the right to tax its giants like the luxury group LVMH, the city council mentioned.
Instead, any additional taxes levied by advanced economies would come from the OECD’s second proposal to agree on a global minimum effective corporate tax rate – a much more controversial plan than the first proposal.
Mathieu Parenti, assistant professor of economics at the Free University of Brussels, said the limited results of the OECD proposals could make them “politically feasible because nothing changes”.
The big tax gains, he said, come from the alternative global minimum tax proposal, which is a “bit brutal” to get “a big slice of the pie and reduce the incentive to shift taxes. “to low-tax countries like Ireland, the Netherlands or Luxembourg. But the OECD would also have a harder time getting an international deal for it.
The Paris-based institution is engaged in its own impact assessment of its proposals and believes that the change in the location of taxing rights would be significantly greater than the study by the French Council for Economic Analysis suggests.
The independent analysis estimated that France is currently losing at least 5 billion euros per year as its multinationals shift their profits and the location of intangible assets, such as brands, to low-tax jurisdictions. That’s about 10%. 100% of annual corporate tax revenues.
The council estimated that there would be only a 0.3 percent increase in French and German corporate tax revenues in a scenario that attempted to replicate the OECD’s plans to prevent multinationals from moving their profits around the world to avoid tax.
Philippe Martin, chairman of the French Council for Economic Analysis, said the low income estimates resulted from proposals to tax “only a tiny fraction of multinational corporations’ global profits” based on where they sell rather than where they are. physical location.
The OECD’s plan is to divide world profits into “current” profits which are taxed as today and “residual” profits, part of which would be taxed in the country of sale. Given the poor results, the board therefore suggested a much more drastic policy of taking a share of the overall profits in the country of sale rather than just residual profits.
The minimal effects found in the independent study are however questioned within the international organization based in Paris. He’s still working on his analysis, and Pascal Saint-Amans, director of the OECD’s Center for Tax Policy and Administration, expects the change in taxing rights to have a bigger and more positive impact on taxpayers. income in major European countries, the United States and China, with heavier losses in tax havens.
But he accepted the general orientation of the results of the French Council, the first part of the OECD proposals always having the objective of addressing the distribution of taxing rights between countries, thus collecting less money than the second. part, which guaranteed all multinationals the payment of a minimum level of tax.