OECD seeks unified tax regime for web giants

The Organisation for Economic Co-operation and Development will host a public consultation next month on its proposed “unified approach” to the taxation of the world’s biggest tech companies. A document released by the OECD Wednesday ahead of the planned consultations outlines skeletal plans for a new approach to tax in the digital economy that would have a significant impact on the web giants, often referred to by the acronym FAANG: Facebook Inc, Apple Inc., Amazon Inc., Netflix Inc., and Alphabet Inc.’s Google. The proposal, which flows out of a series of meetings amongst G20 finance ministers and leaders over the summer, seeks to establish a tax system that would allow companies to tax revenues made in their jurisdiction, and would “envisage a new nexus rule that would not depend on physical presence,” according to the document. On November 21 and 22 in Paris, the OECD is inviting external stakeholders to submit their thoughts and asks for comments by November 12, with a view toward establishing a regime in 2020. The new proposal appears to acknowledge the increasingly intense debate about taxing the tech giants that generate significant revenue from countries despite having no physical presence there. “In a digital age, the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence. The current rules dating back to the 1920s are no longer sufficient to ensure a fair allocation of taxing rights in an increasingly globalised world,” the document reads. According to Art Cockfield, a professor of tax law at Queen’s University and an expert on global digital tax structures, the initiative by the OECD is an attempt to create a “ceasefire” in what he called a “digital tax war that started two years ago all around the planet,” he said in a phone interview with The Wire Report. The “tax war” has created a patchwork of different taxes on digital businesses around the world, in a way that Cockfield says is both bad for businesses and national governments. The OECD’s initiative is a “hopeful development,” he said, and potentially signals the OECD getting over one of the biggest hurdles: the U.S. coming onside with a new unified taxation regime. “All of the FAANGs are based in the U.S., primarily in Silicon Valley, and they don’t like this notion of having to pay taxes in countries where they don’t have a physical presence,” Cockfield said. “It looks like, because of this OECD document, that the United States has finally -- in a very fuzzy way -- agreed to change the regime.” The taxation of Netflix has has been a prominent issue during the Canadian election, as the NDP, Liberals, and Conservatives have all called for taxation, in one form or another, of foreign over-the-top streaming services like Netflix. In December 2018, the Liberals said they would wait for other OECD countries to establish a digital tax regime before moving on its own. “To the extent that countries move forward more rapidly,” finance minister Bill Morneau said at the time, “they will make it more challenging for us to coordinate with an eventual common approach.” This summer, the French government said it would establish a three per cent tax on the French revenues of digital giants. On Monday CBC/Radio-Canada president Catherine Tait announced that the broadcaster would stop collaborating with Netflix to produce content, in something of a U-turn on policy for the broadcaster.

OECD seeks unified tax regime for web giants

Brief | October 10, 2019

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OECD seeks unified tax regime for web giants

Brief | October 10, 2019

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