A global effort to rewrite the rules determining how multinationals are taxed got the blessing of the Group of 20.
“We will continue our cooperation for a globally fair, sustainable, and modern international tax system, and welcome international cooperation to advance pro-growth tax policies,” the G-20 finance ministers said in a June 9 communique.
The Organization for Economic Cooperation and Development is trying to get 129 jurisdictions to agree to redesign the mechanisms that determine a country’s share of multinationals’ profits, and create a global minimum tax regime to discourage “race to the bottom” competition among low-tax jurisdictions.
“We will redouble our efforts for a consensus-based solution with a final report by 2020,” the group said.
Digital Economy Discussion
The OECD’s work was started in response to many countries’ concerns that digital companies weren’t paying enough tax, or not paying it in the right places. But the proposals under consideration would reach far beyond the tech industry.
“These are complicated issues in a changing environment and something I am sympathetic to,” U.S. Treasury Secretary Steven Mnuchin told a G-20 session on the digital economy June 8.
U.K. Chancellor of the Exchequer Philip Hammond cautioned against revolutionary change, instead urging policy makers to consider “modifying, amending and changing our existing system and not tearing it up and building it from scratch.“
The G-7 countries will seek a compromise on digital taxation at their next meeting in July in France, French Finance Minister Bruno Le Maire said.
The group’s next steps on the project—as outlined in the program of work—include an assessment of revenue and other economic impacts, technical work on policy details of the proposals, and continued efforts to broker political agreement.
—With assistance from Enda Curran, Jessica Shankleman, Michelle Jamrisko, Saleha Mohsin, Yuko Takeo, Toru Fujioka and Xiaoqing Pi (Bloomberg).