OECD tax plan aimed at multinationals beset by clashes

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The world's biggest economies are trying this week to rescue a landmark OECD tax deal after difficulties in implementation threatened to derail the push to make multinationals pay more taxes where they operate. Representatives from more than 130 countries gathered at OECD headquarters in Paris for three days to discuss implementing a key part of a groundbreaking tax deal that has been plagued by delays and ratification problems. On the agenda is a change in global law that would allow countries to eliminate the current patchwork of national levies on tech giants like Google, Facebook and Amazon. Officials also hope that the ban on so-called “digital services taxes,” which is set to expire in early 2024, can be extended until a consensus is reached on comprehensive reform. Without an extension, trade wars are likely as countries go it alone in their attempts to claw back more revenue from the world's 100 largest multinationals that are covered by the deal.

Negotiators hope to delay the ban until 2025 out of fear that some countries will struggle to ratify the deal. Among them is the US, where many of the world's largest technology companies are based. A person close Job Function Email Database to the negotiations said “the big political elephant in the room” was whether the US could get Congress to approve any deal agreed upon at the OECD. While the Biden administration supports the OECD agreement, which was tentatively agreed to in the fall of 2021, the tax treaty changes require a two-thirds majority in the Senate for ratification. Biden's Democrats are outnumbered in the Senate by rival Republicans, many of whom bitterly oppose the deal. Meanwhile, some emerging markets fear that the global solution to taxing Big Tech, called “Pillar One” in global tax circles, will reduce their revenue collection.



India in particular is being very difficult,” said one person close to the negotiations. The changes are designed to update international rules so that the world's 100 largest companies pay more taxes where they do business. Currently, finance ministries can only tax a company's income if it is physically present in their country, an approach that is no longer appropriate in the age of digitalization. Instead, the new system would require multinationals to pay taxes based on where sales are made, a change that the OECD has estimated will change where around $200 billion in profits are taxed. Specifically, the changes will apply to multinationals with more than €20 billion in revenue and a profit margin of more than 10 percent. For those companies, 25 percent of their profits above the 10 percent margin would be taxed in the countries where they have sales.