It has been dubbed “double non-taxation” and it’s an international practice that was the focus of discussion last week in Lima, Peru. It is also something that Mexico’s finance authorities want to see addressed.
It was during a meeting of the G-20, a forum for the world’s largest economies, that the Organization for Economic Cooperation and Development unveiled its proposals for BEPS — Base Erosion and Profit Shifting, which has been estimated to cost tax authorities worldwide as much as US $240 billion a year.
The proposal came out of a request from the G-20 to come up with reforms to prevent multinational companies from reducing their tax liability through measures such as declaring their profits in low-tax countries.
The idea was to tax the companies where economic activities take place and where value is created.
Although the OECD’s 15 proposals have been described as the biggest shakeup of multinational taxation in nearly a century, they have also been criticized as not having gone far enough.
But Mexico, according to Finance Secretary Luis Videgaray, has been able to identify more than 20 multinationals it believes should be paying tax in Mexico as a result of earlier recommendations made by the OECD over BEPS.
He cited one of them, without mentioning names, during a G-20 session last week: “There is one company with more than 10,000 employees that exports more than half its production yet pays no tax in Mexico.”
Videgaray, who was also in Lima for meetings of the International Monetary Fund and the World Bank, told reporters that SAT, the federal tax authority, has initiated discussions with more than 20 large multinational firms with the objective that they pay tax in Mexico rather than in their home countries.
Those discussions began a year ago, he said, and are advancing well as the firms are taking a much different approach to the issue than they have in the past. A new attitude has already been seen in Europe where firms are worried about negative headlines proclaiming their tax avoidance strategies.
Videgaray declined to estimate how much the tax would amount to, saying only that it was “a significant sum” and the firms involved are large.