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International Community Agrees on a Road Map for Deal on Taxing Multinational Firms

Companies like Google, Facebook and Amazon are able to cut tax bills by booking profits in low-tax countries

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International Community, Roadmap
"Important progress has been made through the adoption of this new Programme of Work. Pixabay

A total of 129 countries and territories have adopted a “Programme of Work” laying out a process for reaching a new global agreement for taxing multinational enterprises, the Organisation for Economic Co-operation and Development (OECD) said on Friday.

The roadmap aims to resolve the tax challenges arising from digitalisation of the economy.

The Programme of Work will explore the technical issues to be resolved through two main pillars.

The first pillar will explore potential solutions for determining where tax should be paid and on what basis (“nexus”), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located (“profit allocation”).

International Community, Roadmap
The roadmap aims to resolve the tax challenges arising from digitalisation of the economy. Pixabay

The second pillar will explore the design of a system to ensure that multinational enterprises – in the digital economy and beyond – pay a minimum level of tax.

This pillar would provide countries with a new tool to protect their tax base from profit shifting to low/no-tax jurisdictions, and is intended to address the remaining issues identified by the OECD/G20 Framework on Base Erosion and Profit Shifting (BEPS) initiative.

According to a report in RTE.ie, companies like Google, Facebook and Amazon are able to cut tax bills by booking profits in low-tax countries no matter where the end customer is.

In 2015 the OECD estimated revenue losses from BEPS of up to $240 billion, equivalent to 10 per cent of global corporate tax revenues.

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OECD created the “Inclusive Forum” to co-ordinate international measures to fight BEPS and improve the international tax rules.

“Important progress has been made through the adoption of this new Programme of Work, but there is still a tremendous amount of work to do as we seek to reach, by the end of 2020, a unified long-term solution to the tax challenges posed by digitalisation of the economy,” OECD Secretary-General Angel Gurria said in a statement.

“Today’s broad agreement on the technical roadmap must be followed by a strong political support toward a solution that maintains, reinforces and improves the international tax system. The health of all our economies depends on it,” Gurria added.

The document, which calls for intensifying international discussions around two main pillars, was released on Friday, but it will be presented by the OECD Secretary-General to G20 Finance Ministers for endorsement during their June 8-9 ministerial meeting in Fukuoka, Japan. (IANS)

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Trump Announces Migration Deal with Mexico, Averting Threatened Tariffs

U.S. President Donald Trump said late Friday that the United States and Mexico had reached a deal

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Trump, Migration, Deal, Mexico
President Donald Trump and first lady Melania Trump hold hands and wave at supporters as they walk across the South Lawn on their return to the White House, June 7, 2019, in Washington. VOA

U.S. President Donald Trump said late Friday that the United States and Mexico had reached a deal on migration to avert tariffs.

“I am pleased to inform you that The United States of America has reached a signed agreement with Mexico. The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended,” he tweeted.

“Mexico, in turn, has agreed to take strong measures to stem the tide of Migration through Mexico, and to our Southern Border. This is being done to greatly reduce, or eliminate, Illegal Immigration coming from Mexico and into the United States,” Trump said.

Earlier Friday, Trump had tweeted that there was a “good chance” the two sides would reach a deal to avert tariffs over the surge of migrants across the U.S. border. However, he added, “If we are unable to make the deal, Mexico will begin paying Tariffs at the 5% level on Monday!”

Trump, Migration, Deal, Mexico
An employee fuels up a truck with a cargo trailer loaded with goods to import, at the “Fletes Sotelo” moving company, in Ciudad Juarez, Mexico, June 7, 2019. Companies were rushing to ship as many goods as possible out of Mexico to get ahead of possible tariffs threatened by President Donald Trump. VOA

U.S. and Mexican officials returned to the negotiating table Friday for a third day of talks to find a way to stem the migrant flow.

Effect on hiring?

Trump’s trade wars with Mexico and other countries appeared to have spooked American companies into putting the brakes on hiring. They added just 75,000 jobs in May, far fewer than the 180,000 economists expected, the Labor Department reported Friday.

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Although the jobless rate held steady at a 50-year low of 3.6%, Friday’s figures were the latest signal that the U.S. economy, while healthy, is weakening. Manufacturers, which are particularly sensitive to trade disputes, added only 3,000 jobs, extending an anemic streak of hiring in the sector.

Trump, Migration, Deal, Mexico
A migration official checks passengers on a bus, at a checkpoint on the highway in Tapachula, Chiapas state, Mexico, June 7, 2019. VOA
 U.S. and Mexican officials discussed a deal calling for Mexico to sharply increase patrols of its border with Guatemala to curb migration, The Washington Post reported, with the deployment of 6,000 National Guard troops. The newspaper said Mexico and the U.S. could overhaul asylum rules throughout the region, requiring Central Americans to first seek refuge in Mexico rather than traveling through it to reach the U.S.

With such a plan in place, the United States could send Guatemala asylum seekers to Mexico, and those from Honduras and El Salvador to Guatemala.

Earlier Friday in Mexico City, President Andres Manuel Lopez Obrador reiterated his own optimistic position.

Causes of ‘chaos’

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“There is dialogue and an agreement can be reached,” Lopez Obrador said. “I’m optimistic we can achieve that.” He added it was a mistake, though, for the U.S. to link migration with trade, saying again that migration must be addressed by solving social and economic problems in Central America.

Trump, Migration, Deal, Mexico
Avocados from Mexico are seen for sale in a store in Washington, June 6, 2019. Mexican-grown foods would have been hit hard by President Donald Trump’s threatened tariffs, but Trump dropped his plan after the two nations struck a deal on stemming the flow of migrants from Central America. VOA

“The causes of the migratory chaos aren’t being analyzed, only the effects,” he said.

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U.S. authorities have said more than 100,000 undocumented migrants, mostly from the three Central American countries, have crossed into the United States in recent months. The U.S. government announced Wednesday that in May, 144,000 migrants were detained at the border, up 32% from April. It was the highest monthly figure in 13 years.

Trump, Migration, Deal, Mexico
Migrants cross the Rio Grande into the United States, to turn themselves over to authorities and ask for asylum, as seen from Ciudad, Juarez, June 7, 2019. The U.S. Border Patrol’s apprehensions of migrants at the border with Mexico hit their highest level in more than a decade in May. VOA

Some Republican lawmakers, normally close political allies of Trump, had said they would try to block any potential tariffs with legislation, which would have drawn wide support from opposition Democrats. Numerous lawmakers feared rising consumer costs for Americans if the tariffs were imposed on Mexican goods, including cars and numerous food products exported to the U.S. (VOA)