OECD floats sending tech tax proceeds to countries where revenues are generated


It's an effort to de-escalate a global battle over how to tax the digital economy.

The Organisation for Economic Cooperation and Development says it is working to overhaul worldwide tax laws that the organization says are no longer suitable in today's world of multinational businesses, such as Apple, Google, and other tech firms.

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.

Liberal spokesperson Eleanore Catenaro said that the party's proposal would effectively be a placeholder policy until a consensus was reached within the OECD next year, to ensure the country took action on big-tech taxation.

The issue of taxing big cross-border multinational firms has become all the more urgent as a growing number of countries have adopted plans for their own taxes on digital companies in the absence of a global deal. US President Donald Trump was incensed by the tax, ordering an investigation into whether it unfairly targeted US companies.

The OECD said in a statement that its proposal would help the talks to "ensure large and highly profitable multinational enterprises, including digital companies, pay tax wherever they have significant consumer-facing activities and generate their profits".

France adopted its own national tax on digital companies this year, sparking United States threats of tariff on French wine and adding to global trade tensions. It largely echoes the Digital Services Tax that London plans to impose next year. The measures would apply to companies with revenues of more than US$821 million that operate across worldwide borders and have a "sustained and significant involvement in the economy".

More news: Facebook Rejects Biden Campaign’s Request to Ban Trump Advertisement
More news: Johnson & Johnson to pay $8B in male breast growth case
More news: German police say two killed in shooting in eastern city of Halle

"In a digital age, the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence", the framework states.

Researchers found that the additional tax recovered from corporate tax havens would mainly benefit the richest countries.The findings indicate that while there will be a 5% fall in profits booked in tax havens, around 80% of the redistributed profits will go to high income countries.

In an e-mail Wednesday, Facebook Canada spokesperson Erin Taylor said that "We continue to support multilateral approaches like that being undertaken at the OECD".

"Reaching broad worldwide agreement on changes to fundamental global tax principles is critical to limit the risk of double taxation and distortive unilateral measures", it said in a statement.

A Treasury Department spokesman said Wednesday that the United States "is studying the OECD Secretariat's proposal and is actively engaged in the process aimed at forging a consensus on worldwide tax issues" before reiterating the administration's opposition "to unilateral digital services taxes".

The suggestions will be formally presented at a meeting of G20 finance ministers and central bank governors in Washington on October 17 and 18.