Digital taxation: the G20 must support the OECD initiative

G20 finance ministers in Washington are expected to back Friday the proposal tabled last week by the OECD with the goal of reaching an agreement on the taxation of digital giants and multinationals by June.

The Organization for Economic Co-operation and Development (OECD) presents its "Unified Approach," unveiled on October 9, on the taxation of digital giants at a meeting of G20 ministers in Washington on the sidelines of meetings annual reports of the IMF and the World Bank.

The taxation of digital giants and multinationals is a major challenge to adapt global taxation to the digitization of the economy of recent decades, so that states can collect taxes even if the groups are not physically present on their territory .

The negotiations, which opened in the OECD in January after several years of delay, were blocked by the presence on the table of three divergent and "competing" proposals by the United Kingdom, the United States and the United States. India.

The OECD sought a compromise by presenting its own "unified approach" to the negotiating table, involving 134 countries. After the green light of the G20, countries must now be at the negotiating table to reach a political agreement.

"The deadline is June 2020," said Pascal Saint-Amans, director of the OECD Center for Tax Policy and Administration, at a press conference in Washington.

Last week, OECD Secretary-General Angel Gurria issued a warning to the 134 countries that are preparing to negotiate.

"If we do not reach an agreement in 2020, it will increase the risk that countries act unilaterally," he warned, referring to France, which has decided to impose the digital giants on their number of business this year.

EU Commissioner Pierre Moscovici has already announced that "the EU will welcome this approach in a positive way," but while expressing reservations.

"I hope that we do not lose in the way the ambition on the taxation of digital and that it is not diluted," he told AFP.

Tax havens affected

The OECD proposal is based on three pillars. The first defines the scope of the new tax: it stipulates that multinationals that "have significant interaction with end consumers" are included.

On the other hand, it excludes those which do not have a direct link with the public, such as car parts manufacturers, who sell their production to manufacturers.

Second pillar, it provides a system to determine whether or not a country can impose a multinational, according to the turnover of the company.

Finally, it sets the "legal guarantee" for multinationals with an arbitration mechanism in the event of litigation between States and large groups, in order to avoid double taxation.

According to the OECD, the so-called market countries and developing countries would be the winners of this tax reform and the losers would be the tax havens that host the headquarters of multinationals. "They could be significantly affected," said Saint-Amans.

On the other hand, he denied that this proposal is more favorable for rich countries, members of the OECD, than for others who are not part of this institution based in Paris. "Developing countries are involved in the negotiations and are very active," he said.

The GAFA (acronym for Google, Amazon, Facebook and Apple) reacted positively to the OECD proposal.

"Tax policy should give companies the stability to operate domestically and abroad. We continue to support multilateral approaches such as the one adopted by the OECD, "said a spokeswoman for the Facebook company.

For its part, Amazon called the proposal "an important step forward" and renewed its support for the work of the OECD, just as Google has returned to its previous position where it supported the efforts of the institution.