Plan to get tech giants paying more tax revealed
Plans for a shake-up which will force tech giants such as Google, Apple, Amazon and Facebook to pay more taxes in the countries where they do business have been announced by the OECD.
The rules are designed to tackle the issue of big companies parking their European profits in low-tax countries such as Ireland or Luxembourg.
That allows them to see those profits taxed under the more favourable rates that apply there rather than in the countries where they make most of their sales.
The proposals by the Paris-based Organisation for Economic Cooperation and Development (OECD) would reallocate some taxes where the companies “have significant consumer-facing activities and generate their profits”.
OECD secretary-general Angel Gurria said: “We’re making real progress to address the tax challenges arising from the digitalisation of the economy, and to continue advancing towards a consensus-based solution.”
The question over where multinationals pay their taxes has become a major issue in Europe, where some small countries have been accused of offering advantageous tax terms to big companies that establish headquarters there.
For example, the European Union has ordered Apple to pay Ireland €13bn in back taxes after finding their tax deal was unfair.
Mr Gurria urged governments to reach consensus soon to avoid individual countries acting on their own to take on the multinationals.
“Failure to reach agreement by 2020 would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy,” he said.
“We must not allow that to happen.”
The latest OECD proposals will be discussed by finance ministers from the G20 group of major world economies at a meeting later this month.
Negotiations will then begin among the 134 countries that have backed the principle of new rules with the aim of reaching a deal next year.
The OECD is proposing to target companies with annual revenues of more than €750m.
Taxes would apply in a country where they have a consumer-facing business, even if they do not have a permanent established business presence there.
That would cover big digital companies such as Facebook and Google as well as consumer goods makers such as Apple and car makers.
It would then have to be determined whether a company’s sales exceed a certain level in a country that would make them taxable – a threshold that remains to be negotiated but could be adapted depending on the size of the country.
The OECD proposals then call for a formula – also yet to be determined – to establish how much of a company’s worldwide profit can be taxed in a given country where it does business.
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