Is this the answer to taxation for FAANGs?

OECD proposal would mean wider spread of tax revenue from global tech firms

Is this the answer to taxation for FAANGs?
Steve Randall

The issue of the huge revenues of the global technology giants compared to the tax revenues for the countries in which they operate is the focus of a new OECD proposal.

With France and the US agreeing to address the issue, with most of the big names paying the bulk of their tax in their home country, by mid-2020, the economic advisory organization has come up with a plan.

The OECD’s proposal would mean the large and highly profitable Multinational Enterprises (MNEs) including the FAANGs (Facebook, Amazon, Apple, Netflix, Google, and others) would pay tax wherever they have significant consumer-facing activities and generate their profits.

The MNEs would pay their taxes based on rules governing where tax should be paid and the portion of profits that should be taxed.

“We’re making real progress to address the tax challenges arising from digitalisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system by 2020,” said OECD Secretary-General Angel Gurría. “This plan brings together common elements of existing competing proposals, involving over 130 countries, with input from governments, business, civil society, academia and the general public. It brings us closer to our ultimate goal: ensuring all MNEs pay their fair share.”

Global issue, global response
Canadian federal election campaigns include plans to tax tech firms more, with main parties pledging to address the unfair advantages that FAANGs and others currently enjoy.

However, it is considered a global problem that needs a global answer to avoid firms finding new ways to divert profits to less robust tax regimes.

“Failure to reach agreement by 2020 would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy. We must not allow that to happen,” Mr Gurría said.