Agreement on digital tax consensus by 2020
Some 110 countries have agreed to work towards forming an international consensus by 2020 on how to tax digital businesses across borders, the Organisation for Economic Cooperation and Development (OECD) said on Friday.
Big digital companies like Google, Apple and Amazon have for years been able to exploit current rules to legally slash their tax bills in some countries, leaving other governments furious.
In a report commissioned by G20 powers, the OECD said the countries had agreed to review decades-old pillars of the international tax system that the digital economy has increasingly rendered out of date.
The report, which is to be presented to G20 finance ministers at a March 19-20 meeting in Buenos Aires, acknowledged their was a range of positions that would need bridging with some countries considering nothing needs to be changed.
At the heart of the issue are rules on what constitutes a sufficient presence of a company in a country to be taxed there and how profits are allocated across borders in multinational groups.
In the absence of an international solution, some countries like India, Australia and various European countries have set out on their own to close loopholes.
Earlier the OECD had said there was no agreement on how to approach such taxes. “There are divergent views on how the issue should be approached,” the OECD said, adding there was no agreement on how to approach such taxes in either the short or long term.
The group pledged that its member countries “will work together towards a consensus-based solution”.
In particular the report flagged conflicting approaches in the US and European Union, which come as President Donald Trump’s moves to impose steel and aluminium tariffs fuel speculation of a looming trade war. The US has just passed tax reforms intended to coax its multinationals into paying more of their taxes at home, with iPhone maker Apple among the biggest beneficiaries.
The changes are set to allow Apple to bring back some $252 billion kept abroad, a longstanding company goal.
Brussels is meanwhile set to unveil a tax on technology multinationals next week aimed at recovering billions of European earnings from US-based giants diverted through low-tax countries. The EU wants “big tech” to be taxed on overall revenue in the EU and not just on profits, somewhere between two percent and five percent according to a draft proposal obtained by AFP.
The plan will target companies with worldwide annual turnover above 750 million euros, including Google, Facebook, Apple, Amazon, Twitter, Airbnb and Uber — all based in the US. EU Economic Affairs Commissioner Pierre Moscovici has said the plan he will announce on Wednesday will “create a consensus and an electroshock” on taxing digital firms. The question of how to tax web giants will also be high on the agenda at the G20 meeting.