A U.S. proposal to make part of an OECD-led effort to rewrite global tax rules optional “will not fly politically,” the organization’s tax director said.
The Organization for Economic Cooperation and Development is working to get nearly 140 countries to agree by the end of the year to an overhaul of how the digital economy is taxed. The effort is driven by concerns that big tech companies like Facebook Inc. and Amazon.com Inc. aren’t paying enough taxes in countries where they have large customer bases.
After consulting other countries, it’s clear that the U.S.’s preference for making parts of the plan optional won’t find consensus, said Pascal Saint-Amans, director of the OECD’s Center for Tax Policy and Administration. He was speaking at an event in Berlin on Thursday.
“The optionality proposal is still on the table and it’s acting as a barrier to discussions,” he told Bloomberg Tax.
The U.S. in December proposed allowing companies to opt out of a part of the plan, known as Pillar One, that would change some of the rules and agreements that determine when a company is taxable in a country and how much it would pay in taxes there.
The U.S. proposal is a “no-go politically” and would create technical problems for the broader plan, said Martin Kreienbaum, head of international tax at the German Ministry of Finance.
Countries are also negotiating the details of a global minimum tax and anti-abuse provisions that make up Pillar Two of the plan.
“We are willing to compromise on Pillar One if there is a Pillar Two as well, the two are politically linked,” Kreienbaum said.
—With assistance from Hamza Ali and Isabel Gottlieb