G20 officials on Saturday called for leading global economies to join hands and fight against “tax optimization” practiced by leading tech companies to lower the amount they have to pay in taxes. The Organisation for Economic Corporation and Development (OECD) has proposed a new taxation system fo leading tech companies like Facebook, Amazon, and Google, wherein they are supposed to pay taxes to the country from where they operate instead of paying taxes to the countries where they hold a subsidiary. According to OECD, the new digital tax will increase the national tax revenues by over USD 100 billion every year.
Leading tech companies evade taxes by running subsidiaries from countries like Ireland, where the tax norms help them save a lot of money. The setting up of a uniform global taxation system for tech companies and countering the effects of the coronavirus outbreak in China have been the two major topics of discussion in the G20 summit currently. U.S. has been reluctant to accept the new proposal or work on its own proposal of safe harbour until the presidential election later this year. Angel Gurria, head of OECD, has said that the only way forward will be to adopt a unified digital tax internationally. However, most of the European countries including Italy, Germany, and Spain are preparing their own digital tax proposal, making it all the more difficult for OECD to close this at the earliest. The unified digital tax, the OECD expects, will be in place by the end of this year.
Facebook was sued last week by the Internal Revenue Service of the United States for over USD 9 billion in unpaid taxes. The lawsuit filed claims that Facebook undervalued the intellectual property it sold to one of its subsidiaries in Ireland in its tax filings.