Google which is one of the big beneficiaries of the Double Irish tax dodge last year agreed to grant a pay package worth $100.5m, to Sundar Pichai, a native of India, even before he became head of the search engine unit of the new holding company Alphabet. Pichai got another bonanza this year and has been granted stock valued at $209m since early 2015.

 

A Financial Times analysis of company filings, published this week, has revealed that more than twice the number of US companies alerted investors to the risk of higher taxes in their 2015 accounts than a year earlier.

Nearly a fifth of the 136 US companies sounding an alert were technology companies such as LinkedIn and Yahoo. European companies have also began issuing warnings on tax issues.

The FT said that the OECD estimates up to $240bn in tax is lost to avoidance ploys such as the booking of profits in tax havens. Last year it drew up a plan to stop the practice known as “base erosion and profit shifting” (Beps).

Diageo, owner of Guinness, warned in July that some of its proposals would have a material impact on a number of UK companies.

In February, Jonathan Ford in the FT argued that forcing big tax avoiders like Google to publish their tax returns would help boost confidence of taxpayers in the taxation process:

Getting companies to publish their tax returns might sound radical. But it already happens in other countries, such as Denmark and Norway, and the sky doesn’t appear to have fallen in. The lifting of confidentiality would allow HMRC (UK Revenue & Customs) to explain its decisions regarding big companies. It would also raise the stake for corporations such as Google and Amazon that are in the business of testing the boundaries of fiscal tolerance. At present big, wealthy businesses are given too few incentives not to push unduly at the limits of the law.

The Sydney Morning Herald reported last Friday that "just 3% of (Australian) voters think a company tax cut should be the government's top economic priority, according to a devastating poll that will put further pressure on the Coalition's pre-budget planning." Meanwhile in recent weeks corporate tax developments have been reported from the UK, European Union, and Switzerland.

UK

On 16 March, George Osborne, UK chancellor, announced in the Budget that by 2020, the corporation tax rate will be cut to 17% from the current headline rate of 20% and 28% in 2008.

The Financial Times has reported that average rates in the G20 group of 19 leading advanced and emerging economies, according to Oxford university’s Centre for Business Taxation, have fallen from 40% in 1990, to 28.7% in 2015, and will fall further to 27.1% by 2020.

The Centre for Business Taxation has an effective tax rate this year of 18.49% for the UK and the US rate is 34.85% while the US headline rate including state taxes is 40.46% however US companies with significant international business have much lower effective rates.

The FT says that the reduction in the tax to 17%, is estimated to cost the Treasury £945m in its first year, but other corporation tax-related announcements in the Budget will net the government £9bn during the next five years. 

In total, changes to business tax measures announced on Budget Day will benefit the Treasury by a net £3.8bn by 2020.

Switzerland

Switzerland's 26 cantons apply different tax rates and last December the federal finance department estimated that "calculations for 2016 put Geneva in the lead with a tax burden of 34.2%, well above the Swiss average of 25.5%. The canton of Schwyz has the lowest percentage of 10.5%."

Swiss Info reports that the average corporate tax rate among the 26 cantons was 17.9% in 2015, compared with 21.2% in 2006. Switzerland is still placed favourably in international comparisons, but tax rates vary significantly between cantons. In 2015, Lucerne stood at 12.32% and Zug at 14.6%. Geneva is still considering whether to slash its rate to 13%.

In recent years Switzerland has come under pressure from the Organisation for Economic Cooperation and Development (OECD) and the European Union (EU) to end dual tax systems for foreign and domestic companies. For example, cantons typically apply a lower corporate tax rate to foreign holding companies.

Last Sunday week citizens of the canton of Vaud voted overwhelmingly (87%) for reform of the overall corporate tax rate in the canton, proposing a single lower rate of 13.79% from 2019 onwards, compared to 21.65% at present.

The new standard tax rate will be phased in starting in 2017-2019 while at federal level there are discussions on patent box regimes applying a low special rate to profits from innovations and separately, special tax allowances for research and development spending.

Australia

Last week the Australian Tax Office (ATO) reported corporate tax payments of Australia's biggest private companies.

The 321 companies included on the list had a combined turnover of A$145bn in 2013-14. Of these, 223 reported profits and paid a combined A$2bn in tax.

In last year's Australian Budget the company tax rate was cut to 28.5% for small firms — those with an annual revenue of $2m of less — but was left at 30% for bigger firms.

The Australian Financial Review has reported that the government wants to lower the 30% rate to 25% or lower over a period of years. 

Expected economic growth in the year from next July is at 2.5%.

European Commission

A copy of plans from the European Commission, leaked to the Financial Times, show that multinationals with annual turnover exceeding €750m would be required to publish information on the taxes they pay and profits they make in individual countries each year on their websites. The rules would hit EU- headquartered companies as well as other corporations with subsidiaries in Europe. Around 6,000 companies in total would be affected, some 2,000 of which are EU-based.

The FT reported that the scope of the disclosure rules will be limited to activities within Europe, leaving a lack of transparency on profit shifting to non-EU tax havens such as the Cayman Islands and Bermuda.

Ireland will end the Double Irish tax dodge by 2021 while Apple may not be able to use offshore Irish shell companies as if they are onshore companies, avoiding the need to shift profits tax-free via Amsterdam.

Tax avoidance, Google, apple

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