G8 Vows to Take 'Tougher Stance' on Tax Evaders, Shell Companies
Apple recently put a spotlight on the tax structures used by multinational corporations, which the Group of Eight (G8) leaders, meeting in Northern Ireland June 18, tried to ever-so-gently tackle.
On the second day of a two-day summit , the G8 vowed to "take a tougher stance on fighting money laundering and tax evasion but promised little in the way of specific new action," Reuters reported.
One way in which they sought to address the issue was by coming down on so-called "shell companies."
"We've commissioned a new international mechanism that will identify where multinational companies are earning their profits and paying their taxes so we can track and expose those who aren't paying their fair share," said U.K. Prime Minister David Cameron at the end of the meetings, according the Wall Street Journal.
"It may not be the catchiest name in the world," added Cameron, "but this international tax tool is going to be a real feature of ensuring we get proper tax payment and proper tax justice in our world."
The New York Times did its part to move the issue forward, with a May 20 report that accused Apple of using a "web of subsidiaries so complex it spanned continents and went beyond anything most experts had ever seen," in order to avoiding paying billions of additional dollars in taxes.
Ireland was one place that the Times said Apple had subsidiaries with "no employees" that were "largely run by top officials from the company's headquarters in Cupertino, Calif.," in order to make them "stateless—exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world."
Apple CEO Tim Cook was quick to defend Apple's practices. He volunteered to testify before a Senate Permanent Subcommittee on Investigations, saying he welcomed an "objective examination of the US corporate tax system, which has not kept pace with the advent of the digital age."
In his submitted written testimony, Cook said that Apple pays more taxes than likely anyone in the United States (in 2012 it paid $6 billion in taxes), that Apple doesn't use "tax gimmicks," like bank accounts in the Cayman Islands, and that Apple's subsidiary in Ireland isn't a shell company but a real company that employs "nearly 4,000 people."
Cook also complained about the corporate tax of 30-plus percent that's applied to money earned abroad and brought back home. That tax is the reason Cisco, Microsoft, Google and others maintain their overseas tax piles. Cook said that Apple's foreign subsidiaries hold 70 percent of its cash.
In advance of the G8 summit, Britain's Cameron made a speech in which he set up the group to take on the topic, introducing the Multilateral Convention on Mutual Assistance in Tax matters (the earlier-mentioned, terribly named plan), which has been agreed to by more than 50 countries that pledged to "produce plans on how to provide more information" about who owns the shell companies established within their borders, Reuters reported.
Among those that pledged are Bermuda, the British Virgin Island, Montserrat, Jersey, Guernsey and the Isle of Man.
George Osborne, chancellor of the Treasury in the U.K., said in a June 15 statement that the commitments demonstrate the action being taken in the U.K., "but it is vital that we take collective international action through the G8 to tackle the international challenges of tax evasion, money laundering and illicit finance."