More than 130 nations have extended a controversial ban on taxes aimed at corporate technology giants by another year to 2025, as they wrestle to introduce landmark measures that update the international tax system for the digital age.
After three days of talks at the OECD’s Paris headquarters, most of the countries approved a statement that unveiled fresh details on plans to make the world’s largest 100 companies pay more tax where they do business.
They also agreed to put on ice plans to introduce national digital services taxes for another 12 months to make more time to ratify a breakthrough global tax deal that they signed up to in the autumn of 2021 but have yet to pass.
The introduction of a range of digital services taxes would be an obstacle to ratifying the deal, as having a patchwork of national measures would defeat the purpose of agreeing a co-ordinated global fix.
“We are thrilled that we were able to secure approval of the outcome statement by 138 jurisdictions,” Manal Corwin, director of the OECD’s Centre for Tax Policy and Administration, told the Financial Times.
She added that it showed “significant, broad-based agreement to the statement”.
However, five countries, including Canada, refused to approve the extension. That sets up a clash with its neighbour the US, where many of the world’s biggest technology companies are based, and threatens to reignite trade tensions should Canada press ahead with its own plans to tax big tech.
Four other countries involved in the talks did not approve the statement — Belarus, Pakistan, Russia and Sri Lanka.
The talks have focused on how to implement a key plank of the global tax deal. “Pillar I” would lead to the redistribution of $200bn-worth of profits a year from multinationals to countries where sales are made, and requires a change in global tax law.
But countries remain in dispute over the exact wording of the legal language. The OECD tax chief acknowledged the text would no longer be published in July, as planned.
Corwin said this was because there were “a few outstanding issues between a small number of countries that have to be resolved”.
However, a statement published on Wednesday morning set out new details on the conditions required to make the planned rule changes a legal reality, and the OECD remains confident that a signing ceremony proposed for the end of this year can take place.
A ban on the introduction of digital service taxes was due to expire on December 31 2023. Canada has legislated for a new digital services tax to come into force on January 1 2024. People close to the negotiation confirmed Ottawa’s refusal to sign the statement was down to the extension of the ban.
If the country’s digital services tax is introduced as planned, then Washington is expected to fight back on behalf of US tech giants such as Google, Facebook and Amazon.
Last week US trade representative Katherine Tai, urged Canada to refrain from imposing a digital services tax while the OECD process continued.
The countries, meanwhile, also agreed steps designed to ensure the deal is passed in most jurisdictions even if it is not ratified in all countries taking part in the negotiations.
The US’s polarised politics make it unlikely it will be able to ratify the deal in Congress, where changes to tax treaties require a two-thirds majority in the Senate; the chamber is currently split 51 to 49 in favour of the Democrats.
However, under measures agreed this week, the treaty would only need to be signed by 30 jurisdictions, as long as they account for a minimum of 60 per cent of the 100 companies affected by the changes. The countries would need to sign by the end of 2023.
“There’s been a lot of discussion and speculation about the prospects of ratification in the US,” Corwin said. “But that is the third milestone [after finalisation of text and signing by countries] and our approach and our view is we need to get to the first two for that last one to be relevant.”
Source: Economy - ft.com
