Dividends and Billion-dollar flaws remain in global corporate tax deal: analysis

A few months ago, President Biden met other world leaders in Europe prior to the climate change meetings to sign on to the Corporate Tax Deal which 130 leaders signed. The deal was to ensure multinational companies pay their fair share of tax.

In an article by Tom Bergin of Reuters, President Biden said the deal will eliminate incentives to shift jobs and profits abroad. The article asked tax experts to analyze the deal.

Counties such as Ireland (and their our many others) in return of having head offices in the country allow tax allowances which permit multinationals with a a presence in the country to sell intellectual property, such as patents and brands, from one subsidiary to another to generate deductions which can be used to shield profits from tax.

Companies such as Adobe and Oracle have and do use the tax deductions to reduce their taxable income by over $10 billion. Both companies say they conform to relevant tax rules.

Ireland has phased out the world’s best known corporate tax loopholes known as the double Irish, it allowed companies to deduct the intangible assets which was $4 billion in 2014 and by 2019 was $60 billion. (if the companies you invest in has a Irish subsidiary it was likely using the deduction).

Linking to dividend paying stocks, as shareholders you want your companies you invest in to accumulate as much profit as possible to pay shareholders, however if the taxation in the overall tax pie falls, someone has to make up for it. Should shareholders? no then it likely should be some sort of fair taxation on companies. But what is fair is an age old question.

There are more questions than answers, till the next time – to raising questions.

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