OECD plan to tax multinationals a step forward

A company's office building is shown at Canary Wharf in London, England, where much of the city's finance industry is located. Picture: 123RF/ MELINDA NAGY

Under existing rules, multinationals have great leeway to shift profits to low-tax jurisdictions, with little regard to where their products are actually produced or consumed. This so-called base-erosion problem is only going to get worse. The long-term move from manufacturing to services, and from physical to intangible assets, keeps widening the opportunities for avoidance.

One notable advantage of this approach: it doesn’t target a single industry, as countries such as France have done. Technology giants such as Google parent Alphabet and Apple would be affected, but no more than other multinationals of similar size. The idea would encompass any company with at least $800m in annual revenue and a significant customer base in foreign markets. It would apply only to a share of profits above an agreed threshold.

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