Global plan to be drawn up to stop digital companies avoiding tax

20 Mar 18

More than 110 countries and jurisdictions have agreed to come up with a plan on how to tax the digital economy by 2020, the OECD has said.

This would include a common consensus on how to tax big digital companies, such as Google, Apple and Amazon, that for years have been able to exploit rules to legally cut their tax bills in some countries.

“The international community has taken an important step today towards resolving the tax challenges posed by the digitalisation of the economy,” said OECD secretary-general Angel Gurria.

“We have underlined the complexity of the issues, and highlighted the importance of reaching international agreement, both for our economies and the future of the rules-based system.

“The OECD stands ready to accompany countries as they seek to build a common understanding of the issues related to the digital economy and taxation, as well as the long-term solutions.”

The OECD’s said countries will come up with ways to tackle the issue by 2020.

They have so far agreed to review decades-old ‘pillars’ of the international tax system related to the digital economy, which have become out of date.

It also outlined the opportunities that new technologies offer to enhance taxpayer services and improve compliance, as well as risks related to the blockchain technology that underlies cryptocurrencies.

The report, which was commissioned by G20 countries and presented to G20 finance ministers last week in Buenos Aires, said that there is some disagreement among countries about how quickly the interim measures should be introduced.

It also touched on rules which determine whether a company has a big enough presence in a country to warrant being taxed there, and how profits that cross borders are taxed.

Some countries such as India, Australia and various European countries have set up their own rules to close the loopholes in the international tax system in relation to digital taxation.

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