Global tax reform could raise as much as $100B, OECD says

Updating global tax rules could boost government revenue by as much as $100 billion, the Organization for Economic Cooperation and Development said Thursday in an effort to spur complex negotiations between world powers.

The Paris-based group is racing to get nearly 140 governments to agree by the end of 2020 on minimum tax rules and how to make digital multinationals like Google and Facebook pay their fair share in taxes. Failure to progress in coming months could push the U.S. and Europe back toward the brink of a trade war over national efforts to impose their own digital tax rules, which Washington says discriminate against American firms.

“A proposed solution to the tax challenges arising from the digitalization of the economy under negotiation at the OECD would have a significant positive impact on global tax revenues,” the organization said in a statement. “Failure to reach a consensus-based solution would likely lead to further unilateral measures and greater uncertainty.”

Since 2016, the OECD has been steering dual negotiations on changing tax rules. One issue deals with digital tax and how to capture profits of businesses with little or no physical presence in a market where they do business. The second focuses on creating a minimum tax to stop firms from evading taxes by shifting profits between jurisdictions.

The U.S. and Europe narrowly avoided a trade war last month over France’s digital services tax. The U.S. threatened punitive tariffs on French goods, but agreed to hold fire when Paris pledged to delay collecting its levy until December. If there is no agreement at the OECD, France says it will resume collection, risking a response from the U.S.

William Horobin
Bloomberg News