FRANKFURT, GERMANY (AP) – An international debate over how countries tax big United States (US)technology companies such as Google, Amazon and Facebook is heating up, presenting a challenge for President Joe Biden’s new administration.
A mid-year deadline is on the horizon for talks about a global deal to defuse trade disputes with France and other countries that are imposing go-it-alone digital taxes that the United States views as discriminatory.
France imposed a three-per -cent tax on digital revenue for large tech companies, in effect singling out the US tech giants. The French government has said it would withdraw the tax in favor of an international solution being negotiated under the auspices of the Organization for Economic Cooperation and Development (OECD), a Paris-based international organisation of 37 advanced economies.
Experts and officials say time is getting short. Manal Corwin, a tax principal at professional services firm KPMG and a former Treasury Department official in the Obama administration, said digital taxes multiplying outside the OECD process “are threatening to trigger a trade war”.
US trade officials have called unilateral digital taxes unfair and threatened trade retaliation against French goods, but have held off imposing sanctions.
Finance officials from more than 130 countries convened online Wednesday to resume negotiations over how best to make sure multinational companies don’t avoid taxation by shifting their activities and profits among countries. One key question is how to appropriately tax companies such as tech firms that may have no on-the-ground presence in a country but nonetheless do substantial digital business there in the form of online advertising, the sale of user data, search engines, or social media platforms.
The talks are about how to allocate part of a company’s revenue to the country where its services are used so the government there can benefit from the taxes. The two-day meeting is to assess where things stand and no final decision is expected.
OECD Secretary-General Angel Gurria said in an opening speech that it was crucial to reach a deal by mid-2021.
“The importance of reaching an agreement is increasing by the day,” Gurria said. Over 40 countries are considering or planning unilateral digital taxes, and if they impose them, “there will be this retaliation, we will turn a tax tension into a trade tension, maybe into a trade war… when we need the opposite”, he said.
The coronavirus pandemic has only put a sharper edge on the issue of digital taxation. The pandemic has accelerated digitalisation through remote work and contactless activities, and in some cases led to strong profits for digital companies; meanwhile, government budgets are strained by added spending and less tax revenue.