by Julie Martin
Countries will continue to advance unilateral measures to tax digital businesses unless there is some sign that international consensus can be reached on appropriately taxing these firms, an OECD official warned Wednesday.
Speaking during an OECD webinar, Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration, said he would not criticize a push by France, Germany, Spain, and Italy for an EU-wide equalization levy, which would impose tax on the turnover, as opposed to profits, of digital firms.
The four countries signed a letter expressing intent to advance such a tax at the September 15–16 informal EU finance ministers meeting, citing the inability of existing international tax rules to appropriately tax these firms.
Unilateral measures to tax digital firms are also being discussed by Indonesia and Malaysia, and India has already put in place such a measure, Saint-Amans observed.
Saint-Amans said that there currently is no sign that international consensus can be reached on modifying the existing international tax system to tax digital firms because some countries appear unwilling to negotiate. He said that this frustrates other countries and has led to the “stop-gap” measures.
“What matters is that we do have some signals that there will be an overall agreement – it is necessary to avoid unilateral measures,” he said.
Saint-Amans said that reworking the international tax system to account for digital firms will be complex and will take time.
“At the end of the day we probably need a new approach to the permanent establishment definition together [with a] new approach to transfer pricing rules or allocation of profit rules to these permanent establishments,” Saint-Amans observed.
Saint-Amans said US Treasury Secretary Steve Mnuchen, at the G20 summit in Hamburg last July, acknowledged concerns about the taxation of digital firms, but advised against rushing through changes to the international tax rules because of the complexity of the issue.
Saint-Amans added that US appears to remain committed the OECD/G20 base erosion and profit shifting (BEPS) project despite the recent change in administration.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
Latest posts by Julie Martin (see all)
- UN committee considers updates to model tax treaty, developing nation tax guidance - April 21, 2021
- UN Committee of Experts approves new digital tax article for model treaty - April 20, 2021
- Leaked copy of US proposal for Pillar One and Two multinational group tax reforms available - April 12, 2021
- US offers new “Pillar One” compromise plan for taxing large multinationals - April 8, 2021
- UN tax committee releases updated model treaty language on automated digital services - April 7, 2021
Be the first to comment