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The OECD proposes a global 'Google rate' for digital giants to pay based on where their users are

2019-10-09T12:22:59.244Z

The Organization for Economic Cooperation and Development (OECD) has published the first document that wants to close the gap between the digital giants that have


The Organization for Economic Cooperation and Development (OECD) has published the first document that wants to close the gap between digital giants that have turned fiscal engineering into an advantage over their competitors and a growing economic hole for States under pressure from high debt and growing social obligations.

The proposal is a first basis on which a new system should be built. Among its starting points, the fact that physical presence in a country will not be an indispensable requirement for taxing an activity stands out. The States will have the right to charge even if the company sells its services from abroad.

The movement is a consequence of the conflict between these large companies and the countries where they operate on account of the differences between the business they obtain and the taxes and employment they generate. The centennial structure on which current standards are based has been overwhelmed by groups such as Google, Facebook, Apple and last year more than 110 countries agreed to take action for next year. This agreement was endorsed by the last G20 summit held last August in Biarritz (France).

The Paris-based body has unveiled on Wednesday "a unified proposal" to undertake a historic reform of fiscal rules and principles that have regulated international trade relations over the last century and that offers greater scope for action to governments, by Ask companies to pay taxes where they operate, not just where their subsidiaries profit.

"The current norms, dating from the 1920s, are no longer sufficient to guarantee an equitable allocation of tax rights in an increasingly globalized world," the authors of the proposal acknowledge, which argues that in the digital age the assignment of tax rights "can no longer be limited exclusively based on physical presence".

The surpassed scheme implies that digital companies can declare losses in countries where they obtain billions of euros in income, transferring benefits to other territories where tax benefits are much higher. The fact that it is carried out through legal tax schemes does not save these companies from facing increasing litigation with the States.

The organization's proposal aims to address the challenges posed by the digitalization of the economy and guarantee new tax rights to countries where users have access to highly digitized business models, the document notes.

In this sense, the text recognizes that currently a non-resident company is subject to taxes on its commercial profits only if it has a permanent establishment in a jurisdiction, which means having some form of physical presence.

However, the authors of the proposal claim that digitalization has distorted the applicability of this rule, as companies can do more and more business with clients in a jurisdiction without having a physical presence there.

Pay where you are

"Companies will pay their fair share where they have activities and where they get benefits . Countries that currently cannot tax digital giants will be able to do so," says the OECD.

Likewise, the proposal put forward by the international organization contemplates that national governments and affected multinationals have access to legal mechanisms for the prevention and resolution of "legally binding and effective" conflicts.

The OECD, which assumed the task of reforming international taxation at the request of the G20, will submit its proposal for public consultation during the month of November with a view to reaching an agreement in this regard in January 2020.

"This plan brings together common elements of the existing proposals, which involve more than 130 countries, with contributions from governments, companies and civil society and brings us closer to the ultimate goal of ensuring that all multinationals pay their fair share," said the OECD Secretary General, Ángel Gurría, during the presentation of the proposal in Paris.

In this sense, the Mexican has warned that if an agreement is not reached in 2020, "it would greatly increase the risk of countries acting unilaterally", with negative consequences for the global economy. "We must not allow that to happen," he added.

According to the criteria of The Trust Project

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  • Facebook
  • Google
  • Paris
  • economy

COMPANIES Digital users, tiny taxes: Google, Apple, Facebook and Amazon pay 23.9 million a year

FinanceThe Bank of Spain warns of "systemic risk" that Google, Facebook, Amazon and Apple operate as banks

Consumption The English Court expects to bill 1,000 million 'online' in 2020, just behind Alibabá and Amazon

Source: elmuldo

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