Published: Fri, October 11, 2019

OECD proposes global tax overhaul for tech companies

OECD proposes global tax overhaul for tech companies

The proposal follows on from the G20 in June agreeing to plans to have technology giants such as Facebook and Google pay more taxes.

The OECD group of wealthy democracies published its suggestions to bridge gaps between three competing plans to tax technology firms, which now shift the bulk of their earnings to low-tax jurisdictions.

Commenting on the development, Business Europe, tweeted: "We welcome the progress taking place at the OECD to address Digital Tax".

The Paris-based Organisation for Economic Co-operation and Development is leading the negotiations to reach an accord next year.

If all goes well an outline agreement to the countries that have signed up will be created in January 2020.

Alex Cobham, chief executive at the Tax Justice Network and a co-author of the study, said: "We're concerned the OECD may be fumbling a golden opportunity to lead the world into a new era of equitable worldwide tax rights".

The proposals say if a company is deemed to be taxable in a country, then a formula would be needed to determine the portion of the firm's global profits that the country could tax. Wednesday's release brought an 18-page framework plan that officials hope will form the basis of an worldwide agreement on digital taxation as early as next year. The government has already come out with an SEP framework whereby it can tax digital companies in India even if they don't have a permanent establishment.

The approach gathers common elements of three competing proposals from member countries, it said, describing its new effort as a "unified approach".

The proposals will be reported to a meeting of Group of 20 finance ministers and central bank chiefs in Washington next week.

France has been particularly vocal about the need for a digital services tax; over the summer, President Emmanuel Macron signed a law - targeting a slew of big tech companies based in the US - imposing a 3 percent tax on companies worth at $834 million globally and $27.5 million in France.

In September, Google agreed a settlement totalling around US$1 billion (RM4.2 billion) to end a tax dispute in France after similar settlements in Italy and Britain.

Specifically, the French government in July passed laws to apply a tax on tech giants which was immediately met with disapproval from US President Donald Trump, who took to Twitter to both complain and promise a retaliation against France. "Amazon welcomes the publication of these proposals by the OECD, which are an important step forward", a spokeswoman said Wednesday in an email.

The NDP have said they would make sure that big tech companies "play by the same rules as Canadian broadcasters", in part by ensuring they pay taxes.

The proposed changes are an attempt to recognise that the current global economy has become increasingly digitalised, the OECD said, as businesses can now project themselves into the daily lives of consumers without necessarily having a traditional physical presence - an office - in the market.

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