Published: Fri, October 11, 2019
Global News | By Blake Casey

OECD moves to empower countries to tax tech giants

OECD moves to empower countries to tax tech giants

"Today the OECD Secretariat published a proposal to advance worldwide negotiations to ensure large and highly profitable Multinational Enterprises (MNEs), including digital companies, pay tax wherever they have significant consumer-facing activities and generate their profits", said the OECD. The company reiterated that it pays applicable taxes in every country where it operates, including, in Canada, corporate income taxes, sales taxes and payroll taxes. According to the proposal, a company would be taxed by a country if its sales exceeded a certain threshold in the market, with the specific amount yet to be finalised.

The proposals could force companies such as Facebook, Google and Amazon to pay billions of pounds in extra tax, with Britain likely to pocket a significant share.

Governments will get more power to tax big multinationals like Google, Apple and Facebook doing business in their countries under a proposed overhaul of decades-old rules.

Now open for public consultations, the proposal notes re-allocation of some profits and corresponding taxing rights to countries and jurisdictions where MNEs have their markets.

"Big internet firms have pushed tax rules to the limit as they can book profit and park assets like trademarks and patents in low tax countries like Ireland wherever their customers are", Reuters said, noting that "the drive for a global rule book has received new urgency as countries unilaterally adopt plans for a tax on digital companies over frustration with current rules".

OECD Secretary-General Angel Gurría said: "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 global tax system by 2020".

The government said past year that global digital companies have a large consumer base in India but don't pay enough taxes domestically.

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The new rules would target "large consumer-facing businesses" that generate annual revenues from supplying consumer products or providing digital services, even if they do not have a permanent established business presence there.

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.

The OECD hopes to have the overhauled worldwide tax system agreed upon by 2020, after refining it through public consultations and multilateral negotiations.

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

The OECD will present details to next week's meeting of Group of 20 finance ministers and central-bank governors; the organization is warning that global standards need to be put in place to avoid a messy patchwork of unilateral measures and subsequent trade disputes.

If all goes well an outline agreement to the countries that have signed up will be created in January 2020. "We must not allow that to happen", the agency's Secretary-General Angel Gurria said.

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