WASHINGTON — The Coalition for a Prosperous America (CPA) released a statement after the Finance Ministers and Central Bank Governors of the G7 economies announced that they support the Organization for Economic Cooperation and Development’s (OECD) efforts “to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax.” This represents a positive step towards eliminating the ability of multinational companies to avoid paying U.S. corporate tax by shifting profits offshore to tax havens.
CPA has long called for ending tax avoidance by implementing Sales Factor Apportionment (SFA), which would tax profits based on the location where the product was sold. Earlier this year, CPA praised the Biden administration’s Pillar 1 offer to the OECD that would implement a limited SFA for the top 100 multinational corporations. On April 23, CPA urged Senators Ron Wyden (D-OR), Sherrod Brown (D-OH), and Mark Warner (D-VA) to include SFA in their tax framework proposal released earlier this year.
“While not perfect, the G7 announcement represents a positive step forward, especially for family companies like mine that pay a higher corporate tax rate than foreign and multinational competitors,” CPA Chair Zach Mottl said. “To truly end the game of multinational profit shifting, the OECD should implement Sales Factor Apportionment.”
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.
“For too long, multinational corporations have used an army of lawyers and tax accountants to offshore production and avoid U.S. corporate taxes,” said Michael Stumo, CEO of CPA. “It is welcome news that the G7 economies are supportive of addressing the harm to domestic producers from multinational profit shifting. However, it is concerning that the G7 announcement would allow the first 10 percent of profits to be exempt, which would allow some profit shifting to still occur. The Biden administration, which called for implementing Sales Factor Apportionment for the top 100 multinational corporations, should urge the G7 economies and the OECD to fully implement a sales-based apportionment system for all companies shifting profits.”
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.