Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
By Ben Stupples
Other countries may look to copy the U.S.'s minimum levy on global companies’ offshore income in their attempts to refine the taxation of internet-based businesses, according to an OECD official.
John Peterson, head of the organization’s aggressive tax planning unit, said at a University of Oxford business tax conference that “other countries are interested” in the U.S.’s global intangible low-taxed income scheme introduced from the start of this year for American multinational companies’ overseas assets.
Those countries “are looking at it and thinking, ‘Can we get away with the same thing?’” he told Bloomberg Tax at the Oxford University Centre for Business Taxation’s July 2 summer conference. The measure “has fundamentally changed the conversation” on new taxes for digital companies.
GILTI’s minimum 10 percent tax effectively reduces the incentive for American companies to hold their lucrative intellectual property outside the U.S.
The GILTI of a U.S. shareholder of a controlled foreign corporation is generally the U.S. shareholder’s net income from all such corporations, less a 10 percent deemed return on tangible property such as patents or copyright. If GILTI isn’t already taxed abroad at a rate of at least 13.125 percent, it faces a 10.5 percent minimum tax in the U.S.
The U.S. introduced its GILTI levy as part of the 2017 tax act ( Pub. L. No. 115-97).
Internet-based companies’ lack of physical presence, together with how they often derive huge profits from user-generated value, has created issues for tax authorities across the globe.
Globally, lawmakers are currently split on how to tax businesses like Facebook Inc. The Organization for Economic Cooperation and Development is aiming to find a worldwide consensus on the issue by 2020. It will provide an update on the matter in 2019. In the meantime, some policymakers are exploring interim taxes for these companies.
The debate around the taxation of the digitalized economy largely focuses on U.S. multinationals.
In March, the European Union proposed a temporary tax on the revenue of social media and search engine companies, like Facebook and Alphabet Inc.’s Google, and online platforms, such as eBay Inc. In the past, these companies have all received scrutiny over their international tax arrangements.
In the question-and-answer section of a panel discussion at the summer conference, speakers were asked about the impact of the U.S.’s GILTI already leaving these companies facing more tax.
“It’s certainly an issue that gets raised,” Peterson said in response. Due to the GILTI, countries like Ireland have questioned the need for new levies on internet-based business, he later told Bloomberg Tax.
Peterson, though, remained unconvinced that the GILTI can ultimately resolve the taxation of a digitalized economy. It still poses a risk for tax avoidance, as the measure is “cross-credible across all forms of tax,” he said.
To contact the reporter on this story: Ben Stupples in London at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)