The Strategist

OECD proposes to extend French digital tax to other countries

10/10/2019 - 07:40

The Organization for Economic Co-operation and Development (OECD) has prepared a tax reform for multinational IT companies. The measure is aimed to replenish budgets of the countries in which the companies operate, writes the Associated Press.

Vince Smith via flickr
Vince Smith via flickr
OECD proposes to extend the current French law on taxation of the income of global digital companies from a particular country to as many states as possible.

The proposal relates to income from the sale of digital content, for example, software for which it is not required to have an office in the buyer's country. Now such income is taxed in the country of the seller’s registration, and the largest companies take advantage of this by registering in low-rate countries. So, the European divisions of Apple and Google are registered in Ireland, where the income tax rate is 12.5 percent and is one of the lowest in Europe.

From the beginning of 2019, a three percent tax on income from the sale of digital products to French residents began to operate in France. It applies to companies whose income from such operations exceeds €750 million per year.

The introduction of the tax has caused discontent in the USA, where the head offices of many companies are based. Now, their European branches are now forced to pay more taxes in France. After the August talks between Presidents of the United States and France, the parties agreed that the French tax would be abolished after a large-scale international agreement on this issue entered into force.

The current OECD recommendation is aimed at concluding such an agreement. The initiative will be presented to G20 finance ministers at their meeting in Washington next week.