FAQ

Will multinationals pay more taxes?

No, the Fair Trade Tax is not an additional tax but a new way of paying taxes. Instead of paying all their taxes in northern developed countries, the Multinationals will pay some of it in southern developing countries.

How it would be possible to subject part of the profits of Multinational distribution groups to taxes in the producing countries?

It should be remembered that States are free to subject the taxpayers they wish to pay to their national taxes according to their own rules. Nevertheless, the sovereignty of States comes up against international acceptance and the limits set by international agreements, such as double tax conventions. As a result, the taxation of profits in producing countries is based on the recognition in the scope of the international tax law of (i) a permanent establishment in those countries and (ii) a fair trade method allowing an allocation of profits between the country of permanent establishment (producing country) and the country of the head office (importing country).

Why now?

Recent developments favor an evolution of international standards and agreements to impose the profit of Multinational enterprises at the places that best coincide with economic activity and value creation. To date, this work has resulted in particular in the adaptation of national and international rules on transfer pricing for intra-group transactions by Multinationals.

In this context, developing countries raw material producer States are called upon to adhere to and put into practice the new rules of international taxation. It is therefore unthinkable that these new standards would not adapt to the economic and social interests of those countries.

We believe that this international tendency represents a historic opportunity for producing states to increase their tax revenues by subordinate part of the profits of Multinational.

In the end, how does it benefit to the producers on the fields?

The producers on the fields will benefit from the taxes collected through infrastructures and subsidies. Agricultural subsidies  is one of the main reason why the developing countries producers income are so much lower than their colleagues in developed countries.

In the US Farmers got more than USD 22 billion in government payments in 2019 (source: https://text.npr.org/790261705 ). Between 2014 – 2020 , the European Union allocated more than EUR 100 billion to support its agriculture (source: https://ec.europa.eu/info/food-farming-fisheries/key-policies/common-agricultural-policy/rural-development_fr ).

Developing countries cannot afford such necessary support to their producers because they do not have the fiscal resources.

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