G20 leaders will discuss raising taxes for big tech firms next week

Marco Green
October 10, 2019

The world's richest countries began examining a compromise on how to tax multinational companies in a digitalized global economy, potentially calming tensions that have sparked tit-for-tat unilateral moves.

Silicon Valley firms would be forced to pay tax in any country where they "have significant consumer-facing activities and generate their profits" under plans drawn up by the Paris-based Organisation for Economic Co-operation and Development (OECD).

"We're making real progress to address the tax challenges arising from digitalisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based worldwide tax system by 2020", said OECD Secretary-General Angel Gurria.

Saint-Amans said that the planned overhaul would see an impact equivalent to a few percentage points of corporate income tax.

Countries such as France have been pushing for stricter rules which would force the tech giants to pay more tax.

France in particular has railed against European Union rules that let American heavyweights like Google, Apple, Facebook and Amazon declare their earnings from across the bloc in low-tax havens like Ireland or Luxembourg.

Washington, meanwhile, fears that USA companies have been singled out. The EU has ordered Apple to pay Ireland nearly $15 billion in back taxes, for example, after finding that their tax deal was unfair because it was better than what other regular companies could expect.

Amazon, whose European headquarters is in Luxembourg, another low-tax jurisdiction, said called the OECD's latest proposal "an important step forward".

Governments would be able to tax a to-be-determined portion of firms' worldwide earnings, even if they do not have a physical presence in the country, according to a consultation document released Wednesday.

The rise of big internet companies like Google and Facebook has pushed current tax rules to the limit as such firms can legally book profit and park assets like trademarks and patents in low tax countries like Ireland regardless of where their customers are.

The companies that will be affected are defined as companies that operate across borders and have a total revenue of over $821 million.

OECD officials have said a broad agreement is needed by January if the digital tax is to be approved next year - in which case it would come into effect in 2021.

The OECD's highly anticipated proposal for reform of worldwide tax rules will likely further intensify global inequalities and fail to curb rampant tax abuse, new analysis reveals.

Other reports by Click Lancashire

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