CPA Praises Biden’s Proposal to Tax Multinationals: A Major Breakthrough to End Corporate Profit Shifting

WASHINGTON — The Coalition for a Prosperous America (CPA) today praised a key proposal in the Biden administration’s Pillar 1 offer to the Organization for Economic Cooperation and Development (OECD) that would implement a Sales Factor Apportionment (SFA) for the top 100 multinational corporations. CPA has long called for implementing SFA and changing the way the U.S. tax code treats profits from foreign and domestic multinational corporations. In September 2020, CPA published an analysis of the federal corporate tax paid by the S&P 500 companies in 2019 and found they paid on average less than 9% in cash federal tax last year. The analysis also found that by replacing the current corporate tax system with an SFA system at 21 percent, the United States could have expected to earn an additional $97.8 billion in federal corporate tax receipts for 2019.

“It’s long overdue that Congress ended the game of multinational profit shifting while small and mid-size enterprises and other domestic producers are unfairly forced to carry their full tax burden,” CPA Chair Zach Mottl said. “My family company, Atlas Tool Works, pays a higher corporate tax rate than foreign and multinational competitors who use an army of lawyers and tax accountants to offshore production and avoid taxes here. Plus, it’s only fair that Chinese, Korean, and German companies pay some U.S. taxes for the benefit — and the profits — that they have made off the U.S. consumer market.”

On April 6, CPA Tax Policy Director David Morse published an op-ed calling on Congress to “no longer allow multinationals to employ convoluted profit calculations—or claim residence in an obscure, offshore location—as a means to skirt U.S. tax obligations.” In November 2019, CPA urged the OECD to support a move to sales factor apportionment (SFA) as part of its comprehensive review of international corporate tax systems.

“CPA has long called for implementing Sales Factor Apportionment and changing the way the U.S. taxes multinationals,” said Michael Stumo, CEO of CPA. “It’s a great start that the Biden administration’s Pillar 1 proposal calls for implementing Sales Factor Apportionment for the top 100 multinationals. CPA strongly believes that multinationals should pay taxes on the profits where sales actually occur, rather than pretending that profits were generated in places like the Cayman Islands. The Biden administration and Congress should go one step forward and fully implement Sales Factor Apportionment for all companies shifting profits overseas and avoiding paying their fair share of U.S. taxes.”


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