Tuesday, January 8, 2019

Take multinationals at source, a good solution to better tax profits?








Attac member shows up against tax evasion in front of Apple store in November 2017. - PHILIPPE LOPEZ / AFP
  • Fabien Roussel, deputy and secretary general of the Communist Party, wants to introduce a bill to implement "the withholding of profits of multinationals who relocate their profits in tax havens. "

  • 20 minutes asked a tax lawyer and a representative of Oxfam France about the feasibility of such a measure.

  • If applied as for individuals, the withholding tax will not change the amount of tax collected by the state.

  • However, Fabien Roussel's proposal can be understood as an incentive to take into account the "real economic activity" of a company in a country, explains Oxfam France.





And if the withholding tax was not restricted to individuals? Communist MP Fabien Roussel said he tabled a bill on Tuesday to put in place "the withholding of profits of multinationals who relocate their profits in tax havens. "





With this measure, the elected wants to fight against tax optimization, which reduces the amount of corporate tax of certain companies in France. "It's still unacceptable that our SMEs, our traders, our artisans, our very small businesses and even larger companies pay their ruby ​​nail taxes on their profits at rates ranging from 15 to 31% and that companies locate their headquarters in tax havens and, via tax optimization mechanisms well known, known to all, manage to escape their profits tax, "explained Fabien Roussel on Tuesday on RMC and BFM TV.



The big digital companies (GAFA, for Google, Apple, Facebook and Amazon) are indeed taxed on average 9% in the European Union, against 23% for other companies, according to European Commissioner Pierre Moscovici.



"The problem is in calculating the tax base"



Apply the levy at source to multinationals, a good idea to bring money into the coffers of the state? For Louis-Marie Bourgeois, tax lawyer at the Paris Bar, "the problem is not in the payment of tax, but in the calculation of the tax base. "



The corporate tax "is a territorial tax, says the lawyer to 20 minutes. It strikes all the profits made on the French territory. And that's the key to the problem: it's sometimes hard to know where the profit is made. "This is the problem of the transfer price: according to the amount invoiced by the foreign company to the French company, more or less profits are left to the French company. This is for example the case of several large companies that have declared themselves to be established in Ireland or the Netherlands. They then invoice their services to their subsidiaries based in France. "We must ensure that benefits are not billed at abnormal prices, or that these benefits are real," says the lawyer.



"To be taxed, a company has to have an effective presence in the country"



This problem of territorialization is also emphasized by the NGO Oxfam France, which campaigns against tax evasion. "To be taxed, it is necessary that a company justifies to have a stable establishment, that is to say an effective presence in the country, explains Quentin Parrinello, spokesperson of Oxfam France. It is also increasingly difficult to define a stable company, especially for GAFA. "



For the spokesperson, we should not understand the proposal of Fabien Roussel as a transposition for companies of the system put in place since the beginning of the year for individuals, but rather as a proposal to "get rid" of this criterion of effective presence.



"Align the profit with the real economic action"



It would be necessary to go for the tax at the source, so in France, where the company acts. "The idea is to align profit with real economic action," says Quentin Parrinello, taking the example of Google: "Ads sold by Google on the search engine are seen by French consumers. No matter the actual presence, since the French consumer can see these products. "



To know the profits made in France, and therefore tax them, the representative of Oxfam France proposes to look at the amount of sales made in each country, a proposal first made by the economist Gabriel Zucman.



By deducting the turnover made in a country from the VAT paid by the company, it is possible to know the amount of sales in a country. Then, this amount is deducted proportionally from the global profit, which should be communicated by the company to the tax authorities. Gabriel Zucman takes the example of Apple, which could achieve "10% of its global sales in France. In this case, "10% of its global profits would be taxable in France. "A case very different from the current situation. But the bill of Fabien Roussel is unlikely to be adopted, the elected being in the opposition.



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