One more step towards a global GAFA tax
129 countries have identified two possible methods for reforming the taxation of Gafa and IT multinationals. These proposals have been discussed by G20 Finance Ministers on June 8-9. What’s going on ?
France was one of the leader in Europe for reforming the taxation, a regulation that progressed really fastly those past months. Bruno Le Maire, French Minister in charge of this project, said that this law is temporarily and will be repealed when a global agreement will be put in place. It may have been a way to force the global organizations to discuss about this subject.
At the end of May, the Organisation for Economic Co-operation and Development met in Paris to debate about the global taxation of GAFA and IT multinationals and agreed on a work plan containing different options. These proposals are based on two pillars: redefining the contours of fair and equitable taxation of digital companies and large multinationals and establishing a minimum tax rate for all companies.
The OECD’s proposed plan of attack was presented to G-20 Finance Ministers in early June in Fukuoka, Japan. So they have reached a compromise to tax large digital companies by 2020, in order to harmonize international taxation and reduce the benefits enjoyed by multinationals.
In their press statement, the Finance Ministers “welcome the recent progress made in addressing the fiscal challenges emerging from digitalisation and endorse the ambitious agenda of a two-pillar approach“, adding that they will redouble our efforts to find a consensual solution with a final report by 2020.
The approach approved by the G20 is to change the method of calculating corporate taxation and to harmonise tax rates between countries, following OECD recommendations.
The first pillar is to define a “digital presence” for multinationals. The aim would be to distribute company taxation among the countries where they actually sell their goods and services, even if they do not have a physical presence there, like the French project advocated.
The second pillar is to apply a minimum corporate tax rate at a global level.
Work will continue throughout the year to reach a single, consensual solution. The objective is to have this new fiscal framework ready by 2020 …