OECD commits to digital tax agreement by 2021

Written by Hannah McGrath
31/01/2020

A group of 137 countries has backed an Organisation for Economic Co-operation and Development (OECD) commitment to reach international agreement on digital taxes by the end of 2020.

The inclusive framework published today is aimed at “reaching a consensus-based long-term solution to the tax challenges arising from the digitalisation of the economy”.

It comes as countries, including the UK and France, have pushed ahead with their own temporary domestic taxes on the revenues of digital tech giants - such as Facebook, Google, Amazon and Apple - while the international community attempts to formulate co-ordinated action.

US president Donald Trump is opposed to such taxes on US-headquartered firms and has threatened to retaliate with trade tariffs on countries, including France, which impose them.

Speaking at Davos, UK chancellor Sajid Javid, said: “We plan to go ahead with our digital services tax in April – it is a proportionate tax, and a tax that is deliberately designed as a temporary tax.”

The plans, announced under the previous government, would levy a two per cent tax on the revenues of social media platforms, online marketplaces and search engines which make more than £500 million in global revenues from digital activities, with more than £25 million of that deriving from UK users.

Speaking at Davos, UK chancellor Sajid Javid, said: “We plan to go ahead with our digital services tax in April – it is a proportionate tax, and a tax that is deliberately designed as a temporary tax.”

The plans, announced under the previous government, would levy a two per cent tax on the revenues of social media platforms, online marketplaces and search engines which make more than £500 million in global revenues from digital activities, with more than £25 million of that deriving from UK users.

OECD secretary general Angel Gurría said: “The OECD will do everything it can to facilitate consensus, because we are convinced that failure to reach agreement would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy.”

The OECD said participating countries had agreed to negotiate a series of new rules on where taxes should be paid, the proportions of profits that should be taxed and ensuring that multi-national enterprises which conduct “significant” business in a place where they may not have a physical presence, but can be taxed fairly in these jurisdictions.

The agreement marks “a significant step” for the OECDs’s digital taxation negotiations, after members were asked to consider three competing proposals to address the tax challenges of the digital economy.

The statement said there would be remaining technical work and political challenges to deliver a consensus-based solution by the end of 2020, including a meeting of members next July in Berlin where political agreement will be sought on the “detailed architecture” of the proposal.

Gurría added: "It is more urgent than ever that countries address the tax challenges arising from digitalisation of the economy, and the only effective way to do that is to continue advancing toward a consensus-based multilateral solution to overhaul the international tax system.

"We welcome the Inclusive Framework’s decision to move forward in this arduous undertaking, but we also recognise that there are technical challenges to developing a workable solution as well as critical policy differences that need to be resolved in the coming month