A United Nations committee has signaled support for an effort to help developing countries tax tech giants, but final approval will likely wait until 2021.
The U.N.'s Tax Committee of Experts, which has been in discussions over two weeks, voted 12-10 Oct. 23 to include an amendment, known as Article 12B, to its model treaty. But the committee is expected to wait on final approval to give opposing countries time to draft language that outlines their objections in the finished version, two sources familiar with the discussion told Bloomberg Tax Tuesday.
Advocates have warned that developing countries don’t have a big enough role in an OECD-led effort to get nearly 140 countries to overhaul how the digital economy is taxed. Article 12B’s backers say the amendment addresses concerns that the countries don’t have the resources to handle complex tax disputes with multinationals and bigger countries that have more resources and experience. The amendment is a simpler alternative to the Organization for Economic Cooperation and Development’s plan, they say.
But critics of Article 12B have argued that the U.N. approach could add to the division over how to tax the digital revenue of tech companies such as Facebook Inc. and Amazon.com Inc. A growing number of countries are pursuing unilateral measures, sparking trade threats from the U.S.
The committee is to continue discussions Wednesday. The U.N. didn’t immediately return a request for comment.
The U.N. approach focuses on the taxation of digital companies, while the OECD’s plan would apply more broadly—including a global minimum tax that could affect multinationals in any industry, and a plan to reallocate more profits to countries where companies have consumers or users, which may apply to large, profitable consumer-facing businesses.
—With assistance from Isabel Gottlieb.