A landmark global agreement to ensure that big name international firms, such as Amazon, Apple and Google, pay their fair share of tax on local sales, has been delayed.
Bloomberg reported that Mathias Cormann, the OECD secretary-general, this week told a panel at the World Economic Forum’s annual meeting in Davos, Switzerland, that progress on ironing out technical details on the digital tax deal was going less quickly than planned.
It comes after the Organisation for Economic Cooperation and Development (OECD) last October reached an agreement on a global corporation tax rate.
That agreement sounded the begin of the end for global corporations utilising low-taxing countries such as Ireland or Luxembourg, to limit their corporate tax obligations.
Last October 136 countries and jurisdictions, representing more than 90 percent of global GDP, agreed a global minimum corporate tax rate of 15 percent.
This was a major reform of the international tax system that will ensure that Multinational Enterprises (MNEs) are subject to a minimum 15 percent tax rate from 2023, the OECD said at the time.
The deal, which officials had hoped to sign off by mid 2022, aims to reallocate rights to tax big digital groups such as Amazon, Apple and Google to the individual countries where their sales actually take place.
That OECD agreement finalised the deal that had been reached by the G7 finance ministers at a meeting in London last year, ahead of the G7 summit in Cornwall in June 2021.
But now it is being reported that OECD secretary-general Mathias Cormann, expects a delay to its implementation, after he reportedly said there were “difficult discussions under way”, and that instead of being implemented next year (2023), it would not come into force until 2024 at the earliest.
“We deliberately set a very ambitious timeline for implementation initially, to keep the pressure on… but I suspect that it’s probably most likely that we’ll end up with a practical implementation from 2024 onwards,” he reportedly said.
Cormann added it was “manifestly” in the interest of the US to join the deal and that he was “quietly optimistic” that a compromise which all members could back would be presented in the EU.
It should be noted that US approval of the deal is currently stalled in the US Congress.
OECD’s Cormann was asked whether prospects for US ratification would be derailed if Republicans (who mostly oppose the deal), win majorities in the House of Representatives and the Senate in November’s midterm elections.
“I cannot imagine that any country… would make a judgement that would put themselves at that sort of disadvantage,” Cormann replied.
“I believe that irrespective of who’s in the majority in Congress… this is manifestly in the US interest.”
Meanwhile the delay has also been confirmed by French Finance Minister Bruno Le Maire, who on Tuesday said the global digital tax deal might not be ready until the end 2023 or early 2024, Reuters reported.
“As far as Pillar I is concerned – digital taxation – we won’t spare our efforts to convince the international community and the members of the OECD to do their best efforts to have a consensus in the coming months,” Le Maire was quoted as saying, after chairing a meeting of EU finance ministers in Brussels.
“It might be the end of 2023, it might be the beginning of 2024, the key point is to have a total overhaul of the international taxation system,” Le Maire reportedly added.
The issue of mostly American big name corporations using certain low tax European nations such as Ireland or Luxembourg to base their operations, has long been a bug bear for the European Commission and European governments.
In 2019 for example, Amazon was accused of paying less tax in the UK over a 20 year period, than some major UK retailers pay in a single year.
But the European Commission has not enjoyed much success in its pursuit of US firms paying tax.
For example in July 2020, Europe’s second-top court rejected an EU order that Apple had to pay 13 billion euros ($11.8bn) in Irish back taxes.
The EC is currently challenging that ruling.
As a consequence of an absence of an agreement corporate tax rate, France and other countries had introduced their own digital tax regimes.
The United States responded and introduced tariffs on about $2bn of imports, including from the UK, in retaliation for those digital service taxes.
But the US suspended the tariffs for 180 days in order to allow talks to take place at the G7 and G20 summits in 2021.
However, the new corporate tax agreement will likely have its critics, who argue that 15 percent is too low.
In June last year tax activists levelled a serious allegation against what they call the ‘Silicon Six’, namely Facebook, Apple, Amazon, Netflix, Google and Microsoft.
The Fair Tax Foundation alleged it had undertaken a forensic analysis of the tax conduct of the Silicon Six, and alleged the firms had paid $100 billion less in tax than they had claimed.
US FCC regulator gives its official approval for SpaceX to use its Starlink satellite internet…
Privacy quest. Google is a repeat offender, says BEUC, as ten European consumer groups file…