The Organisation for Economic Cooperation (OECD) is urging world economies to come on one page to tax social media giants not where they form subsidiary companies but where they do business.
Leading world economies must show unity in dealing with aggressive “tax optimization” by global digital giants like Google, Amazon and Facebook, G20 officials said on Saturday.
The OECD says this could boost national tax revenues by a total of $100 billion a year.
The call for unity appeared mainly directed at the United States, home to the biggest tech companies, in an attempt to head off any stalling on the rules until after the U.S. presidential election in November.
“There is no time to wait for elections,” German Finance Minister Olaf Scholz told a tax seminar on the sidelines of a meeting of G20 finance ministers and central bankers.
“This needs leadership in certain countries,” Scholz said, looking directly at U.S. Treasury Secretary Steven Mnuchin, sitting next to him at the seminar.
The taxing of digital firms and the effect of the coronavirus outbreak on the global economy are among the hot topics being debated by G20 financial leaders, from the world’s 20 largest economies, during their talks in Riyadh this weekend.
The OECD wants to set a minimum effective level at which such companies would be taxed and seeks agreement by the start of July, with an endorsement by the G20 by the end of the year.
“A coordinated answer is not the better way forward, but, given the alternatives, the only way forward,” OECD head Angel Gurria told the seminar.
Mnuchin said OECD countries were close to an agreement on the minimum tax level, which he said would also go a long way to resolving the issue of where tax is payed.
“I think we all want to get this done by the end of the year, and that’s the objective,” Mnuchin told the seminar.
Mnuchin sought to reassure G20 delegates that a U.S. proposal to add a “safe harbor” regime to the tax reform effort — which has drawn criticism from France and other countries – would not let companies simply opt out of paying taxes.
“It’s not an optional tax,” he said. “You pay the safe harbor as opposed to paying something else. People may pay a little bit more in a safe harbor knowing they have tax certainty.”
U.S. officials say their proposal would allow a multinational enterprise to elect to pay more foreign tax in exchange for enhanced tax dispute resolution benefits and administrative relief. But many questions remain.