The Organization for Economic Co-operation and Development Is Moving Towards Encouraging Taxing Digital Services
Throughout the world, there has been a great deal of debate related to taxing digital services. Most countries would appreciate the additional revenue that would come from this sort of tax, but digital service companies have a clear preference for paying low corporate tax.
As this is a concern around the world, the Organisation for Economic Co-operation and Development (OECD) has a strong opinion on the matter. The OECD is working to standardize the tax rules found in the world’s 34 richest countries. According to the OECD, members of the organization agreed to consider benchmarks related to taxes on digital services.
The announcement from the OECD indicated that the jurisdictions and countries that are members of the organization will work on cooperation. Specifically, they will be increasing their efforts to come up with a global solution for the best way to tax multinational companies given the digital state of the economy. While the decision to work on coming to a solution is a small step, it is nonetheless a step in the right direction.
There Are Numerous Complications
The main problem related to taxes on digital companies is the fact that many people worry that these businesses are taking advantage of the tax system and even undermining it. There are numerous proposals from world leaders and organizations for how to find a solution. Some feel that support for OECD’s cooperative efforts may come down to the slow pace it takes.
By contrast, other proposals would move more quickly, with companies and certain countries facing potential consequences. The Netherlands, Ireland, and Luxembourg are all known for attracting those wishing to avoid taxes, meaning that they have much to lose in terms of business if tax regulations become stricter.
There are also numerous country-specific concerns regarding digital taxes, particularly for the three countries already mentioned. Ireland, for example, suffered when the European courts ruled that the country let Apple avoid paying €13 billion in taxes. Britain has indicated that it wants to implement a modest digital tax and that it will join an OECD scheme, if one arrives.
The European Union has also been pushing towards its own decisions regarding digital taxes. It developed a strategy with a long-term solution and interim measures. The European Council would ideally like to have a coordinated tax policy but accepts that this is simply not possible at the moment. The EU proposed the interim policy of a 3 percent tax on digital services starting in January 2020. There is, however, a great deal of disagreement regarding this proposal.
At the moment, it seems that no global solution to digital taxes is forthcoming.
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