What Happened: The Organization for Economic Cooperation and Development has unveiled a proposal to increase countries' ability to tax digital companies for sales on their territory independently from the location of a firm's headquarters, the Financial Times reported Oct. 9. The OECD is asking the G-20 to approve the proposal by the end of January 2020, after which it will reveal a more detailed plan.
Why It Matters: The proposal is a boon for large European countries, such as France, Germany and Italy, which have long been dissatisfied with the taxation practices on digital companies. But other nations, such as Ireland, that host a large number of digital companies thanks to their generous tax regimes will likely push back against the plan amid fears that such firms could withdraw some of their business operations. An OECD-wide agreement on taxing digital services would also reduce the risk of U.S. retaliatory tariffs.
Background: The European Union has already failed to approve a bloc-wide digital tax scheme due to resistance from Ireland and Luxembourg. At the same time, the United States has threatened higher tariffs on French imports in response to Paris' unilateral introduction of a digital tax.
- U.S., France: Washington Takes an Aggressive Position Against France's Digital Tax Proposal (July 11, 2019)
- Digital Tax Proposals Produce New Discord in the EU (Feb. 14, 2018)
- EU: New Tech Taxes Will Drive Divisive Decisions (March 16, 2018)