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  • OhOh no!

  •  Sorry, butter fingers.

  • Make sure you turn the scales on.

  • Alright how many have we got there? 2,000.

  •   Yeah, we still have

  • a bit more to go.  

  • Okay, a bit more to go. Fill them up, fill them up.

  •   So why are we

  • filling up jarsTom?  

  • We're trying to explain why a new global tax rate has

  • been agreed by some of the world's biggest economies

  •   In June 2021, the leaders

  • of the countries that make

  • up the Group of Seven, otherwise known as the G-7, 

  • endorsed a deal to make multinational

  • companies pay more tax.

  • Governments have been trying to solve the

  • challenge of taxing companies operating

  • across many countries for a long timeand that 

  • challenge has only grown with the rise

  • of huge tech corporations

  •   Now don't go over 

  • because then we'll

  • have to start taking them out.

  •   Okay. Oh my god,

  • it's so much pressure.    

  • CNBC's Silvia Amaro  covers European politics

  • and macroeconomicsIf she's not in London,

  • you're likely to find her in Brussels

  •   So, there's a reason why

  • we've done this. I promise.

  • We've filled up this jar to 5,000 grams.

  • That's because we are working on a conversion

  • rate of 1 gram to 10 million dollars.

  • Soif we've got 5,000 grams that is how much?

  •   50 billion

  • Correctwell-done Silvia

  • So, $50 billion dollars is how much Amazon made in

  • revenue, in Europe, last year, in 2020.
 

  • But despite the record salesAmazon's European headquarters

  • in Luxembourg made a  $1.4 billion loss and

  • therefore paid no corporation  tax to the grand duchyOther

  • big tech companies in recent years have also 

  • paid little  corporate tax.

  •   Turnover for Facebook's 

  • U.K. outfit in 2019 was 

  • $1.4 billionand  yet they paid $516 

  • million in corporation tax.

  •   In the 12 months ending

  • in June 2020, Google's 

  • turnover in the U.K. was  $2.37 billion and they paid

  • less than $708 million in corporation tax

  •   So, now it's your turn to

  • explain to us why that is

  • and how a new global tax rate is going to change that.

  • Facebook, Apple, Amazon, NetflixGoogle and Microsoft

  • are some of the world's biggest tech companies.

  • This graph shows their total revenue in the U.S. was more

  • than $4.6 trillion  between 2010 and 2019.

  • Their declared profits were  $1.1 trillionand the tax

  • they paid was $180 billion  – which means they paid a

  • 16.2% tax rate during that time.

  • Given the U.S. had a 35%  federal corporate income 

  • tax rate for most of that decadethe gap in tax paid

  • with the expected headline rates is $155.3 billion

  •   What's going

  • on hereSilvia

  • Why aren't these companies paying more in taxes

  •   Well, first all they are

  • paying the taxes they are

  • supposed to pay. The core problem here is that there

  • are different tax rates across the globe and when you are a

  • global company you have the means to change your

  • headquarters in a way that you pay less taxand so it just

  • makes sense from an accounting perspective

  •   Sothis new tax deal aims

  • to change things in two ways.

  • First companies will have to pay tax where they operate

  • and not just where they have their headquarters.

  • So that is a big change alreadyand then the second

  • thing here is that they want to implement a corporate

  • minimum tax rate of 15%. The idea there is to prevent

  • countries from undercutting one another

  • One of the ways organizations can reduce their tax is

  • through corporate profit shifting.

  • This is where businesses set up their headquarters

  • and create local branches in countries with low

  • corporate tax rates and declare profits there

  • For examplethe U.K. has a corporate tax rate of 19% 

  • so a business could move its  headquarters from the U.K. 

  • to the Isle of Man where there is a 0%

  • corporate tax rateThe company could then

  • book its profits in the Isle of Man and pay no tax

  • even if the profits mainly come from sales made elsewhere.

  • To attract business and stay competitiveone country after

  • another after another have  been making significant cuts

  • to their own ratesincluding members of the G-7. 

  •   For too long there has been

  • a global race to the bottom

  • for corporate taxes, where countries compete by

  • lowering their tax rates instead of the wellbeing

  • of their citizens and natural environments.

  •   Corporate tax rates have

  • been in decline for decades.

  • In the last 40 yearsthe world's biggest economies

  • have made significant cutsThe U.S. has reduced its

  • rates by more than 25%, the U.K. in excess of 30%

  • and Germany by a whopping 40%. 

  •   This has been a real 

  • challengeTom.

  • On the one handas a nation, you want to attract

  • these big companies and essentially improve your

  • economic activitybut on the other hand you're

  • competing with a lot of other countries who are

  • offering more attractive tax incentives and in the

  • end these companies have been really skilled at 

  • manoeuvring these profits. A lot of people have

  • not been happy about that

  •   There are several popular

  • tax havens to shift profits

  • tosuch as Malta, the Cayman Islands

  • and of course Ireland.

  • Apple, the world's biggest company, chose the country 

  • to be its European headquarters

  •   One report concluded

  • that it was the biggest

  • 'tax haven' in the world, with foreign multinationals

  • shifting $106 billion of corporate profits to

  • Ireland in 2015 aloneThe headline tax rate

  • in Ireland is 12.5%, but according to the report 

  • the effective tax rate is around 5%. 

  •   While the new tax deal 

  • aims to prevent the

  • shifting of profits to these low tax countries,

  • there are concerns that a  large loophole could be

  • exploited by companies  which run their business

  • at very low profit margins

  •   So a lot of detail has yet

  • to be worked out, including

  • which companies will actually be affected

  • by these new rules and there is a concern out

  • there that Amazon might not be impacted, simply 

  • because the company has registered less than 10%

  • profit which is needed to be considered under

  • these new rules. Howeverthe U.S. Treasury secretary Janet

  • Yellen has said that Amazon as well as Facebook will

  • qualify under these new rules

  •   Amazon says it has low profit

  • margins because it reinvests 

  • significant sums into  infrastructure and research

  • adding that it complies with  all local tax laws, amounting

  • in hundreds of millions of dollars in corporate tax paid

  • to European nations through other parts of the business

  •   Part of this G-7 deal seems

  • to be to prevent another

  • trade war, a trade war over digital taxes. Explain that

  •   Right, this is a very

  • interesting one because

  • the Communique that the finance ministers agreed

  • to does say that ultimately the idea is to remove all

  • digital services  taxes that are in

  • place to avoid double taxation.

  • However, we're not sure how this is going to work because 

  • both Canada and the EU have said that they want,

  • nonetheless, to have their own digital taxes

  •   This could be a very tricky

  • issue from a political

  • perspective because we know that from the previous

  • administration that the U.S. has issues with the

  • idea of a digital tax, in the sense that most

  • of these digital companies are American and they don't

  • want these firms to be disproportionately targeted.

  • In factunder the presidency of Joe Biden, that policy

  • has not changed, even though we have to say that the tone

  • there is very different from

  • the previous administration

  •   Is there any

  • opposition to the deal?   

  • There's a lot of opposition to the deal in the sense that

  • some people say that 15% is not enough

  • Others criticise the deal because it will only benefit

  • rich countries and not  low-income nations and

  • ultimately there's also a group of countries out

  • there who don't like the idea that it's these seven

  • countries that came up with this agreement.

  • They don't want to be told what to do based

  • on a small number of nations

  • To increase pressure on low tax countries, many

  • believe there needs to be a wider agreement

  • amongst the G-20. Collectively, the G-20

  • economies account for around 80 percent of

  • theworld's gross domestic product

  • and 75 percent  ofglobal trade

  • The Organisation for Economic Cooperation and

  • Development estimated that  a deal with wide-reaching

  • consensus could increase global corporate income tax

  • revenues by about 50 to 80 billion dollars per year

  •   The pandemic has left a

  • lot of these countries

  • that we're talking about in a dire economic situation.

  • Has that been one of the driving forces in

  • getting this deal agreed?  

  •   Absolutely, well, first

  • of all it's important to

  • point out that the deal is not totally completed.

  • We still need to see an agreement at the G-20 and

  • at the OECDbut definitely the

  • pandemic played a huge role here.

  • First because the economic shock was very severe across

  • the board and these big corporates were the ones

  • that profited the most from the pandemic in the sense

  • that most of us were at home, working from home and needed

  • these technology companies to work for us in a way

  •   And then the other thing that

  • I would point out is the U.S. 

  • perspective is very interesting here as well because there was

  • a lot of social unrest in the United States, prior to the

  • election of Joe BidenSo when he arrived at

  • the White House, he knew he had to do something

  • about inequality and to address those social

  • concerns and what would be the best way to do that

  • than taxing big corporates

  • It's also important to bear in mind that the

  • Senate needs to approve the deal in its current

  • form and that could be a tough battle

  • for Joe Biden and his team

  •   Ultimately though we have

  • the seven most advanced

  • economies coming up with an agreement on global

  • corporate tax and that in itself is significant

  • because it does change the rhetoric and it does propel

  • the debate among international institutions on how to

  • move forward in terms of taxation.  

  •   Hold that, don't drop it

  • Ok, heavy.  

  • Now take a lookYeah.

  •   How many coins do you

  • think is in the jar

  • and if you guess close to the right 

  • answer you can keep it.

  •   I'm going to

  • say, 5000?  

  • Do you want another guess?

  •   10,000? 

  • No, you're getting colder.

  • 1,250.  Only 1,250?

  •   Yeah, you can

  • give it back to me.   

OhOh no!

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B1 tax tax rate corporate corporate tax headquarters deal

Is it time for big business to pay up? | CNBC International

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    Summer posted on 2021/06/25
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