Wanted: global digital tax push after pandemic, US vote stall talks

Digital Tax US

Negotiators from 140 countries will inquire Washington and its own G20 partners this week to reaffirm political support for global rules to tax digital giants following the coronavirus and looming US elections stalled the process, officials said.

The hard-fought talks over how to tax digital behemoths, such as Google and Facebook, are a part of the biggest overhaul of international tax rules in a generation, conducted under the stewardship of the Organisation for Economic Cooperation and Development (OECD).

Over the next couple of days, negotiators are expected to wrap up months of discussions on rewriting cross-border taxation principles for the era of digital commerce, including a worldwide minimum corporate tax rate.

But agreement remains elusive after high tech backing needed to finalise a deal this year has drained away following pandemic-related travel constraints forced conversations to move to Zoom and Washington started playing for time, reluctant to commit to a bargain in the build-up to the Nov. 3 presidential election.

Nevertheless, the nations are very likely to sign off OECD’s technical patterns for new rules about how to apportion taxing rights to governments for cross-border company and a global minimum tax fee.

Related Article:
Zoom plans to roll out strong encryption for paying customers

There is broad consensus to help keep the process moving. Officials desire G20 finance ministers to bolster their commitment to a negotiated international deal instead of letting every country go its own way with federal digital taxes, something which may add up to a hefty bill for businesses.

“We’re leaning towards an extension of the mandate from the end of year through 2021,” one official briefed on the matter said before the talks.

Another official said that the G20 finance ministers would finalise a decision when they meet online next week.

“The OECD will certainly stay on top of this. The United States supports this process and has repeatedly warned against unilateral action outside these negotiations,” the official stated.

NEGOTIATING BY ZOOM

While the Trump government initially endorsed a rewriting the global tax rules, Washington lost appetite for the political talks needed to finalise key technical points, officials say.

Related Article:
Nokia to cut a third of jobs at French arm Alcatel-Lucent

The talks’ move from the OECD’s Paris headquarters to hours of video conferencing also damped prospects for a swift, leaving no scope for crucial give-and-take negotiations between formal meetings.

“Usually you do this at the lobby, you certainly do this at the dinner prior to the dialogue, or in the breakfast or the coffee break. Zoom is excellent but they don’t offer the coffee,” OECD head of tax Pascal Saint-Amans said last month.

France, which has a weak digital economy of its own was among the first to create its own digital tax last year, becoming the target of trade retaliation threats from Washington, which considers such national taxes as unfairly discriminatory against US platform businesses. Paris in return, accused the US of “creating hurdles” for a global tax deal with demands for a voluntary opt-out for US companies.

The Trump administration slapped in July additional duties on French cosmetics and handbags, but suspended them until January. France put its tax on hold until the end of 2020, but has warned it would reinstate it the absence of a global deal this year and the European Commission has committed to reviving plans in 2021 for an EU-wide digital tax to finance a new European recovery fund.

Related Article:
Google says Chinese and Iranian hackers targeted Biden and Trump campaigns

“They’re worried that the OECD won’t have the ability to pull this off since the US has been back and forth on its place,” EY Global Vice Chair of Tax Kate Barton said.

The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Leigh Thomas. Additional reporting by Andrea Shalal in Washington and Michael Nienaber in Berlin. Editing by Tomasz Janowski.

To stay on top of the latest developments across the platform economy and gain access to our problem-solving tools, databases and comprehensive content sets, you can subscribe for just $19 per month.

Share This Post