09/10/2021

A historic agreement against tax injustice

2 min
Amazon already has several logistics centers in Catalonia, one of the largest in El Prat.

BarcelonaAmazon, the well-known e-commerce company, did not pay any corporate tax in 2020 in eight European countries, including Spain, where it had a total turnover of more than 44,000 million euros. How did it do it? Well, by paying tax only in Luxembourg, where the parent company of the European subsidiaries is based. This is a legal but clearly unfair practice, since it deprives the states where a large part of the economic activity takes place from obtaining resources through taxes. On the other hand, this money is concentrated in low-tax countries, such as Luxembourg, which practise tax dumping. This is what the agreement of 136 countries representing 90% of the world's GDP to apply a minimum corporate tax rate of 15% for multinationals with a turnover of more than 750 million euros aims to avoid.

The agreement, negotiated under the umbrella of the OECD, represents a paradigm shift because it brings together giants such as the United States, China or India, and also all EU members, where there were countries such as Ireland, The Netherlands and Luxembourg who applied low tax policies to attract companies. "The global minimum rate is not intended to eliminate tax competition, but rather sets multilaterally agreed limitations", says the OECD. The international body estimates that, when the tax is implemented, countries will collect an additional $150 billion (130 billion euros) in revenue from large corporations annually.

The agreement therefore seeks to strengthen public finances at the global level and to create a more equitable tax competition framework. The idea is very simple: you pay where the activity is generated and, as a minimum, this corporate tax will be 15%. So-called tax avoidance was a common practice, and not illegal, but it caused great harm to those who sought to impose fair taxation on large multinationals, as is the case in Spain. It is precisely the pandemic that has demonstrated the need for reserves of public resources, both to meet direct health expenditure and to be able to compensate for the economic downturn. In both the EU and the US, ambitious public investment plans are being implemented to boost the economy but they are resource-intensive, and it is unfair that large multinationals do not contribute fairly to this massive collective effort.

The road to applying the agreement announced on Friday will still be long and arduous, but it must be the first step towards a reformulation of the global economy rules. Scandals such as those revealed by the Pandora papers, or the Panama papers before them, show that there is an intricate network of law firms and tax havens whose aim is to steal resources from the tax authorities. And only those who have more can access, while the vast majority of the population pays their taxes religiously, and woe betide those who do not because the full weight of the law will fall on them.

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