OECD Tax Deal On Track To Become Rich Country Stitch-up: Oxfam
On the eve of technical talks to thrash out the final details of the OECD tax deal ahead of the G20 Finance Ministers meeting next week, Oxfam is calling for world leaders to bring fairness and ambition back to the table and deliver a tax plan that won’t leave developing countries with next to nothing. Oxfam’s Tax Policy Lead Susana Ruiz said:
“What could have been an historic agreement to end the era of tax havens is rapidly becoming a rich country stitch-up instead. As the final details are being ironed out, it is shameful that the legitimate concerns of developing countries are being ignored while countries like low-tax Ireland are able to water down the already limited aspects of the deal. The proposal for a fixed global rate of 15 percent will overwhelmingly benefit rich countries and increase inequality. The G7 and EU will take home two-thirds of new cash that it will bring in, while the world’s poorest countries will recover less than 3 percent, despite being home to more than a third of the world’s population.
“New rules that would force tech giants and other big corporations to pay taxes in countries where their goods or services are sold were meant to boost public coffers, but are far off the mark. Less than 70 multinationals will pay more tax globally while countries most in need of more tax revenue will get next to nothing for hospitals and schools and social care under these new corporate tax rules. Nigeria, which has refused to sign up to the OECD deal, stands to receive as little as 0.02 percent of its GDP in additional money each year —equivalent to US0.48 cents per citizen.
“It is appalling that while the majority of the world struggles with scarce vaccine supply and worsening hunger and poverty, rich nations are grabbing for an ever-bigger slice of the pie. But developing countries can still fight for a fairer tax deal. If the agreement fails to reflect their interests, they should have no qualms about leaving the negotiating table and chucking this one-sided money-grab onto history’s scrap heap.”
140 countries are currently negotiating a two-pillar tax deal under the OECD-G20 umbrella. The first ‘pillar’ aims to make the world’s largest corporations pay more taxes in the countries where they earn profits. Based on current proposals, Oxfam estimates that it will affect only 69 multinationals and would only apply on ‘super profits’ above 10 percent. Loopholes could let the likes of Amazon and ‘onshore’ secrecy jurisdictions like the City of London off the hook. Extractives and regulated financial services are excluded from the deal.
New analysis by Oxfam estimates that 52 developing countries would receive as little as 0.02 percent of their collective GDP in additional annual tax revenue if the OECD’s proposal for ‘Pillar One’ is endorsed.
The second ‘pillar’ seeks a global minimum corporate tax rate. An updated draft of the OECD tax plan this week dropped "at least" from a proposed minimum global corporate tax rate of "at least 15 percent".
The 15 percent rate is well below the UNFinancial Accountability, Transparency and Integrity (FACTI) Panel recommendation made earlier this year, which called for a 20- to 30-percent global corporatetaxon profits. The Independent Commission for the Reform of International Corporate Taxation (ICRICT) has called for a 25 percent global minimum tax to be applied.
A 25 percent global minimum corporate tax rate would raise nearly US $17 billion more for the world’s 38 poorest countries (for which data is available) than a 15 percent rate. These countries are home to 38.6 percent of the world’s population.
Developing countries are more heavily reliant on corporate tax. In 2018, African countries raised 19 percent of their overall revenue from corporate tax, compared to just 10 percent for OECD nations.
In thirteen jurisdictions – Bhutan, Chad, Colombia, Democratic Republic of the Congo, Egypt, Equatorial Guinea, Indonesia, Kazakhstan, Malaysia, Nigeria, Papua New Guinea, Singapore and Trinidad and Tobago – corporate tax revenues made up more than one-quarter of total tax revenues in 2018.