Leading world economies must show unity in dealing with aggressive “tax optimisation” by global digital giants like Google, Amazon and Facebook, G20 officials have said.
The Organisation for Economic Cooperation and Development (OECD) is developing global rules to make digital companies pay tax where they do business, rather than where they register subsidiaries.The OECD says this could boost national tax revenues by a total of Sh10 trillion or $100 billion a year.
The call for unity appeared directed mainly at America, home to the biggest tech companies, in an attempt to head off any stalling on the rules until after the US presidential polls 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 US 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.
Financial leaders
OECD wants to set a minimum effective level at which such firms 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,” said OECD head Angel Gurria.
A draft G20 communique showed financial leaders will endorse the OECD approach to the issue in their final statement on Sunday, backing the need pay tax where business is conducted and the need for a minimum rate.They will also “reaffirm commitment to reach a consensus based solution by end of 2020”.
The OECD efforts were stalled late last year by last-minute changes demanded by Washington, which many G20 officials view as reluctant to deal with a potentially politically tricky matter before the presidential poll.
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 paid, although he warned that some aspects of the tax proposal could require approval by the US Congress.
“I think we all want to get this done by the end of the year, and that’s the objective,” Mnuchin said. Mnuchin sought to reassure G20 delegates that a US proposal to add a “safe harbour” regime to the tax reform effort – which has drawn criticism from France and other countries – would not let firms simply opt out of paying taxes.
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