The OECD has proposed a shakeup of global tax rules that could force digital and consumer firms like Amazon to pay more tax where they do business.
If adopted, large companies would not be able to route as much revenue through hubs based in jurisdictions with lower effective rates of corporate taxation, such as Luxembourg, Ireland and the Netherlands.
“In a digital age, the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence. 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 current system is under stress and will not survive if we don’t remove the tensions,” said the OECD’s director of tax policy, Pascal Saint-Amans, per Reuters.
The OECD, a policy forum for mainly richer countries, said in a press release that it published the:
“… proposal to advance international negotiations to ensure large and highly profitable multinational enterprises, including digital companies, pay tax wherever they have significant consumer-facing activities and generate their profits.”
“The winners would be large countries including the US, China, UK, Germany, France, Italy and developing economies. These would see an increase in their rights to levy tax on corporate income earned from sales in their territories, while the companies themselves, tax havens and low tax jurisdictions such as Ireland would lose.”
The French government, which recently adopted its own digital tax on US companies, has signalled support. Bruno Le Maire, the French finance minister, was quoted by Reuters as calling the plan “very good”.
Delano has requested comment from the Luxembourg government.
Amazon, which is appealing a European Commission order to pay €250m in back taxes to Luxembourg, expressed support for harmonised worldwide rules. A press statement from its EU headquarters in Luxembourg issued on Wednesday said:
“Amazon welcomes the publication of these proposals by the OECD, which are an important step forward. We continue to actively support and contribute to the OECD’s work to achieve a consensus-based solution with respect to taxation of the evolving international economy. Reaching broad international agreement on changes to fundamental international tax principles is critical to limit the risk of double taxation and distortive unilateral measures and to provide an environment that fosters growth in global trade, which is vital for the millions of customers and sellers that Amazon supports around the globe.”
The proposal will face its first debate by world leaders during the meeting of finance ministers and central bank governors from the G20 group of global economic heavyweights in Washington, 17-18 October. The OECD hopes to reach an agreement on its plan early next year.
Bad news for tax havens, Ireland, Luxembourg and big multinationals