Concerns about how multinational companies pay taxes are linked to falling tax revenues worldwide. US President Barack Obama routinely points out that one building in the Canary Islands is home to 18,000 companies.
In Spain, the Organisation for Economic Co-Operation and Development echoed Obama's concerns about tax revenues. In a February report, the group provided advice on how to get rid of the problem. The problem has special relevance in Europe, especially countries like the United Kingdom, France and Spain. These nations continue to struggle to boost weak tax revenues. In Spain the tax rate on companies is around 30%, but the actual rate is more like 10% or even less after multinationals take advantage of numerous deductions and tax loopholes.
The system involves concentrating high levels of debt in one country in order to deduct the interest paid on that debt and send profits to company branches operating in countries with kinder tax rates. Inspectors from the Ministry of Finance think that despite multinational tech firms' ability to skirt tax obligations in Spain, other companies are showing equali abilities to do so.
Companies as different as Microsoft and Nestlé operate in Spain. And the United States is putting strong pressure on mutlinationals to pay realistic tax rates to the right countries. Tax agencies in many countries are struggling to claim revenues from these companies. Taxation troubles in these countries could be solved with increased coordination of tax investigation efforts and wider commitment to put multinationals under tax scrutiny.
