U.S. wants multinational companies to pay tax to nations where they earn money

In an effort to ensure global corporate tax reform, the Unites States proposed to the international community that some 100 multinational companies should pay their tax to countries where they actually generate revenues. Such a sensational corporate tax plan runs counter to the existing taxation system where businesses fulfill their tax obligations in countries on which their headquarters are based. A series of inevitable controversy is set to await the new taxation system over what is subject to tax, how taxes are levied, etc. If globally large-scale markets such as the United States and European countries put in place a system to impose levies on multinational businesses based on how much they earn locally, Samsung Electronics, Hyundai Motor Group and other South Korean conglomerates with a great deal of global sales will face the consequences as well.

The United States sent a proposal letter on this new global corporate tax reform to OECD member states at a comprehensive implementation framework meeting on Thursday (local time), said the South Korean Ministry of Economy and Finance on Friday. The OECD IF is a conference body of some 140 nations to discuss the global taxation system to prevent multinational businesses from dodging their taxes. The meeting is currently focused on two agenda items – ways to strengthen taxes on sales generated by multinational firms overseas and a system to put a lower limit on global corporate tax rates.

The official document shared by the U.S. proposes that around a hundred global businesses regardless of their field or headquarters location be selected to mandate them to pay their corporate tax where their actual sales are earned. Washington has not specified the list of countries in question. International discussions on global corporate tax have recently been led by European nations to target U.S. tech giants such as Google, Facebook, and Amazon.

The U.S.-proposed plan differentiates itself in that Washington does not limit fields of business. In fact, it has been opposed to discriminatory taxation on its tech firms. Washington's latest proposal aims to seek global cooperation to keep some multinational companies from avoiding their tax obligations by setting up their headquarters in corporate tax-free regions such as Virgin Island while raking in great revenues in major countries including the U.S. market. On the other side of the coin, not only the U.S. but also other nations will be assigned to wield greater taxation authority over U.S.-headquartered businesses such as Google, which make a large profit in Europe, Asia and etc.


woo@donga.com