Digital and tech firms face new taxation proposed by the Organisation for Economic Co-operation and Development’s (OECD) to ensure all multinational enterprises (MNEs) pay their “fair share”.
Under the new regime, “large and highly profitable” companies would pay tax wherever they have “significant“ consumer-facing activities and generate profits – even in countries where they have no physical presence.
If approved, it would impact businesses such as Amazon.
The new plans form part of the OECD’s work to make international tax rules “fit for purpose for the global economy of the 21st century” and address tax challenges that have arisen from “digitalisation of the economy”.
The OECD’s public consultation document, “Secretariat Proposal for a ‘Unified Approach’”, states that some profits and tax rights would be reallocated to countries where companies make their biggest sales.
It would also decide in what countries businesses should pay tax and how much.
OECD secretary-general José Ángel Gurría said: “We’re making real progress to address the tax challenges arising from digitalisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system by 2020.
“This plan brings together common elements of existing competing proposals, involving more than 130 countries, with input from governments, business, civil society, academia and the general public. It brings us closer to our ultimate goal: ensuring all MNEs pay their fair share.”
“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.”