The launch of a new tax plan has been recently published by an international economic body. With regards to the plan global firms will have to pay more tax.
The proposals of the new plan, known as the Organisation for Economic and Development (OECD) proposals will now allow governments to tax big technology firms such as Google, Apple and Facebook.
Furthermore, multinational companies will also be liable for tax even if they are not physically present. Tax authorities have faced the challenge of companies that do business in more than one country.
By allocating profits to subsidiaries in countries, a straightforward way to structure business in a way which minimizes tax bills is attained. This process also includes minimum corporate tax rates and tax havens even if the business takes place at a small scale.
This issue surfaced when the services of big tech companies in countries have been little or when they have no physical presence. The new OECD proposals dictate rules on proportion of profits which should be taxed in every country.
OECD is an organization of mainly rich countries, the body’s work on corporate tax however includes a much wider group of about 134 countries and jurisdictions.
In the wake of the situation, the organization’s Secretary General Angel Gurria commented: “We’re making real progress to address the tax challenges arising from digitalisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system.”
Sources allege, several countries such as Britain and France have made their own plans with regards to digital services taxes. While the French tax is already in force, the British proposal will allegedly come into effect in April 2020.
Experts believe such unilateral measures could intensify international economic tensions. In particular, US companies are expected to be severely affected.
“Failure to reach agreement by 2020 would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy,” Gurria added.
Campaigners have criticized the measures, “The OECDs proposals bring more complexity for tax abusers to hide behind, fail to meaningfully curb corporate tax abuse and will shrink the tax revenues of lower-income, non-OECD member countries that currently suffer losses most intensely from corporate tax abuse,” said Alex Cobham, chief executive of the Tax Justice Network.
Tags : Organisation for Economic and Development, OECD, Britain, France, Google, Apple, Facebook,