Global digital tax talks to move forward

A group of 137 countries and jurisdictions agreed to move ahead with negotiations to address tax challenges of the digital economy, according to a statement released Friday by the Organization for Economic Cooperation and Development (OECD).

The countries “affirm their commitment to reach an agreement on a consensus-based solution by the end of 2020,” the statement said. The statement followed talks among the countries this week in Paris that were overseen by the OECD.

The multilateral negotiations come as several European countries have been pursuing unilateral digital taxes that would primarily affect major U.S. tech companies such as Facebook, Amazon and Google. These countries are seeking to raise tax revenue from companies that have many users in their jurisdictions but pay little in taxes there.

However, U.S. policymakers oppose individual countries acting on their own to create digital taxes, arguing that the taxes unfairly target American tech companies, and think the best route would be an agreement on a framework at the OECD level.

After France enacted a digital tax last year, the U.S. trade representative proposed tariffs on $2.4 billion on French goods in response. The two countries earlier this month reached a truce under which France will postpone collecting its tax until the end of the year and the U.S. will postpone tariffs. Treasury Secretary Steven Mnuchin has also warned the United Kingdom and Italy that they will face tariffs if they move forward with digital taxes.

The OECD said that the countries participating in the digital tax talks have agreed on an approach that will form the basis of negotiations on “Pillar One” rules about where taxes should be paid and how profits should be allocated.

Mnuchin proposed in December that Pillar One be a “safe-harbor regime,” which would mean that companies could choose whether to opt into it. 

The statement released by the OECD said that many other countries participating in the talks “express concerns that implementing Pillar One on a ‘safe harbour’ basis could raise major difficulties, increase uncertainty and fail to meet all of the policy objectives of the overall process.” The countries involved in the talks won’t make a decision about the safe-harbor issue until after other elements of an agreement have been reached, the OECD said.