OECD plans to tax GAFAs and multinationals

The OECD wants to harmonize the taxation of Internet giants and multinationals. The organization issued its proposals on Wednesday. Negotiations could lead to rules as early as next year. In Switzerland, this could result in tax losses.

According to the project, large companies would not only pay their taxes at the group's headquarters, but also in countries where goods are exported and sold and profits are generated, according to a statement from the OECD. A minimum tax rate would be established.

The proposal forms the basis of the forthcoming negotiations between the 134 member countries. It is mainly aimed at solving the taxation of multinationals that make profits in markets that are not physically present. In the viewfinder, Google, Amazon, Facebook and Apple (GAFA).

From 2020

The new regime needs to be put in place quickly. Real progress has been made in solving the tax problems brought about by the digitization of the economy, said OECD Secretary-General Angel Gurria quoted in the statement.

A consensus is expected to emerge by 2020, he said. Failure to achieve this goal will increase the risk of countries acting unilaterally, with negative consequences for the already fragile global economy.

The OECD proposal is based on three pillars. The first defines the scope of the new tax for groups that have "significant interaction with end consumers". Excluded are those that do not have a direct link with the public, such as automotive suppliers, who sell their production to manufacturers.

In the second pillar, it provides a system for determining whether or not a country will be able to tax a multinational, depending on the company's turnover. "This is the volume of turnover that would determine a new right to impose for countries," said Pascal Saint-Amans, director of the OECD Center for Tax Policy and Administration.

For example, the organization cited a limit of 750 million euros. Finally, it sets the "legal guarantee" for multinationals, with an arbitration mechanism in case of litigation between states and large groups, in order to avoid double taxation.

Tax losses for Switzerland

Asked about the consequences of this proposal for Switzerland, the State Secretariat for Financial Affairs remains cautious. "There are still many open elements that are controversial," he said on Wednesday. It is not clear what the losses would be for Switzerland.

But we can already start from the idea that small countries whose wealth is based on innovation and exports should expect tax losses. Switzerland is not fundamentally opposed to an OECD solution. It advocates a multilateral approach to avoid unilateral measures such as a national digital tax.

The Confederation, however, defends the principle of taxation on the place of value creation of goods as has been done so far. The share of profits imposed in other countries should be low.

As for the minimum tax rate provided by the OECD, the State Secretariat for Financial Affairs states that Switzerland is committed to maintaining international competition between countries. The new system could instead curb growth and redistribute income from taxation.

Finance Minister Ueli Maurer discussed these plans at the National Council in June. "It could upset our tax system," he said. Tax losses are likely to be in billions of francs.

Tax havens targeted

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.

The work will be presented at the next meeting of the G20 Finance Ministers in Washington on October 17 and 18.