OECD Countries Fail to Reach Tax Agreement for Digital Multinationals

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OECD Countries Fail to Reach Tax Agreement for Digital Multinationals

Earlier this week, 137 OECD member countries were unable to reach an agreement on the taxation of large digital companies before the end of 2020, a deadline set by the G20, therefore risking a proliferation of unilateral initiatives.

The glass is half full: the package is almost ready, but a political agreement is missing”, acknowledged the head of fiscal policy at the OECD, referring in particular to the blockade of the United States, the birthplace of several digital giants.

In the absence of a formal agreement, countries adopted a report that defines the overall framework for this reform, which should define new rules so that “large profitable companies that carry out international activities pay their fair share of taxes in the jurisdiction where they make profits” , according to the OECD.

The OECD also foresees the introduction of a global minimum tax rate, which could be fixed at 12.5%. The roadmap will be presented this week to finance ministers from the G20 countries, who in 2018 gave the OECD a mandate to reform an international tax system made obsolete by the appearance of GAFA (acronym for Google, Amazon, Facebook and Apple) and others.

France led the way by adopting a tax on digital giants in July 2019, which has been in effect since January 1, 2019. In the face of threats of retaliation from the U.S., Paris decided to suspend its application, but warned that unless if an international agreement was reached by the end of the year, it would collect the tax.

Paris also warned that if the OECD negotiations reached an impasse, the European Union (EU) should address the issue. During its last summit in July, the European Council asked the Commission to present a proposal for a “digital fee” in the first half of 2021.