Unilateral actions by countries to tax the revenue of tech companies are “politically motivated” and will have consequences as efforts continue to reach a global consensus, an IRS official said.
Several countries, including Italy, India, Poland, and the Czech Republic have put forward their own proposals to tax the revenue of tech companies such as Facebook Inc. and Alphabet Inc.'s Google, after efforts to pass a European Union-wide digital tax stalled this year.
- “The U.S. is clear on its opposition to digital services tax and we’ll do our best to make that view known around the world,” Brian Jenn, deputy international tax counsel at the Treasury Department, said at the May 10 American Bar Association tax section meeting in Washington.
- “These measures are political measures and could have political consequences and that could effect the conversation at the OECD,” Jenn said.
- Tax officials have questioned countries taking unilateral measures, saying the policy steps could derail a broader effort by the Organization for Economic Cooperation and Development to correct a mismatch between where profits of digital companies are taxed and where value is being created.
- The OECD is seeking to reach global consensus on how to tax digital companies by 2020.
- Under the current international tax system, digital businesses are able to sell goods and services and gain substantial market share in a foreign country without any physical footprint, which limits that country’s ability to tax the company’s earnings.