OECD proposes tech tax to stop giants hiding profits 

OECD proposes tech tax to stop giants hiding profits 

The Organisation for Economic Cooperation and Development (OECD) has published a proposed shakeup of tax regulations in a bid to stop Facebook, Apple, Amazon and other tech giants moving their profits around the world to avoid paying tax. 

The winners would be large countries, including the US, China, the UK, Germany, France, Italy and various developing economies. 

The companies themselves, tax havens and low-tax jurisdictions, like Ireland, would lose out. 

At present, if a firm does not have some form of physical presence in a country, it is not liable to pay taxes on its profits there. This, however, becomes problematic in a digitalised economy. Firms can now do business in any jurisdiction without having any physical presence.

Planned regulations look to charge multinationals more in tax, regardless of whether their profits come from digital services or goods.

It would also make tech giants pay more corporate tax in the countries where they make the most profit.

The OECD is seeking agreement in principle from the G20 by the end of January so that it can work up detailed regulations and stop countries lowering their corporate tax rates to keep businesses based inside their borders. 

“In a digital age, the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence,” an OECD consultation said. “The current rules dating back to the 1920s are no longer sufficient to ensure a fair allocation of taxing rights in an increasingly globalised world,” the Paris-based international organisation’s proposal added. 

Achieving an international consensus is crucial in order to limit the perils of double taxation and unilateral distortive measures. 

The OECD’s Base Erosion and Profit Sharing (Beps) programme aims to counter tax-dodging strategies used by firms to find regulatory loopholes. 

The OECD estimates that up to US$240 billion is lost by governments annually because of corporate strategies that relocate profits to low-tax regimes.

Amazon reported that its UK arm last month paid £220 million in tax for the year until December last year on sales worth £10.9 billion. 

Amazon said it would “continue to actively support and contribute to the OECD’s work to achieve a consensus-based solution”.

José Ángel Gurría, the OECD secretary general, said: “This plan brings together common elements of existing competing proposals, involving over 130 countries, with input from governments, business, civil society, academia and the general public.

“It brings us closer to our ultimate goal: ensuring all multinational enterprises pay their fair share.”


Picture credit: Wikimedia

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