US tech tax proposals get favourable response

A global tax on technology companies such as Google and Facebook has seemingly moved nearer after multinationals and countries welcomed new proposals from US President Joe Biden.

Biden has put forward a plan for a digital tax that would see America’s big tech companies paying more local tax in return for a lower corporation tax rate.

The move is designed to clear the logjam that has seen talks started in 2019 and led by the OECD stall and individual countries such as the UK, France and Spain introduce their own version of a digital sales tax.

The US president is concerned that the developments would see US tech giants taxed twice and has threatened retaliatory measures against goods from countries where a digital tax is imposed.

According to a leaked document in the Financial Times, 100 of the world’s biggest multinationals, including the tech giants like Google  (NASDAQ:GOOG), Apple, Facebook, Microsoft and Amazon, would be liable for regional tax bills.

Pascal Saint-Amans, the head of tax administration at the OECD, welcomed the US proposals. “This reboots the negotiations and is very positive,” he told the FT.

“It is a serious proposal with a chance to succeed in both the [international negotiations] and US Congress. Peace is more important than anything else and this would stabilise the [international corporate tax] system in the post-coronavirus environment.”

According to the US plans, the minimum tax rate to be 21%, which has already led to criticism from low tax rate jurisdictions such as Ireland, where corporations are taxed at 12.5%, a rate that has been hugely successful in attracting businesses to locate there.

The IMF also welcomed the minimum tax suggestion as a way to halt the race to the bottom for corporation tax.

Britain’s digital services tax is charged on large businesses that provide a social media service, search engine or online marketplace to UK-based users.

Currently levied at 2%, it raises £400mln a year and a replacement would be expected to generate a similar amount said the report.

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