( US President Obama Image: Headlinedigest)
Is America’s emphatic response to French proposals tabled this week ahead of the G20 finance ministers meeting for a new tax on internet multinationals like Apple, Google and Amazon, based on the volume of personal data collected.
France’s quarrel with the U.S is that according to existing international tax rules these companies have no taxable presence in the countries where they source most of their customers through the collection of their personal data.
(Pierre Moscovici French finance minister Image: Reuters)
The French are pushing for the adoption of radical changes to these rules. Principally those related to the existence of a taxable presence of a company in the territory of another so that these digital companies can be caught by the tax dragnet.
Protective of their multinationals, the U.S is only in favour of ‘tweaks’ to the global regime but not proposals for wholesale overhaul expected to be presented by the OECD in its report to the G20 meeting this Thursday. A draft of this ‘leaked’ document which has been in wide circulation for more than a week details a number of anti-tax haven measures and other initiatives designed to thwart tax evasion, base erosion and other corporate devices to shift their profits away from the countries where their sell goods and services, or source their customers.
According to the OECD’s preliminary report to the G20 this in February:
“Nowadays it is possible to be heavily involved in the economic life of another country, for example, by doing business with customers located in that country via the internet, without having a taxable presence therein. In an era where non-resident [corporate] taxpayers can derive substantial profits from transactions with customers located in another country, questions are being raised as to whether the current rules ensure a fair allocation of taxing rights on business profits, especially where the profits from such transactions go untaxed anywhere.”
Despite its stated resolve to pursue avenues to further combat tax evasion at the end of the last G8 Summit, the US has made it clear that its commitment does not extend to its home-grown internet giants.
Obama might feel differently when non-US rivals for the personal data of its own citizens arise, but until then the U.S seems content to maintain the ‘status quo‘; casting serious doubts on the G20’s acceptance of anything other than a watered-down version of the OECD’s proposal for reform.
[For more on the tax avoidance/tax evasion debate click here.]
[Missed yesterday blog post? Its here.]