Currently, multinationals tend to pay most of
their tax in the country where they are based.
That’s particularly true for business carried out
online, such as ad revenue from online searches
or social media.
“We’re making real progress to address the tax
challenges arising from digitalization of the
economy, and to continue advancing toward a
consensus-based solution,” said OECD Secretary-
General Angel Gurría.
The issue has become particularly big in the
European Union, where multinationals with
business across the continent pay taxes almost
exclusively in the EU nation where their local
headquarters are based, often a low-tax haven
like Ireland, Luxembourg or the Netherlands.
In some cases, the small countries have been
accused of offering advantageous tax terms
to multinationals who agree to establish
headquarters there. The EU has ordered Apple
to pay Ireland almost $15 billion in back taxes,
for example, after finding that their tax deal was
unfair because it was better than what other
regular companies could expect.
The issue of how to better tax multinationals,
particularly digital businesses, came to a head
over the summer after France put a tax on the
digital operations of large tech companies. That
drew complaints from the U.S., where most of
the big tech companies are based.
The two sides agreed in August to try to reach a
global deal, after some other European countries
had threatened to follow France’s path. France
pledged to reimburse companies any excess
taxes once an international deal is in place.
The OECD’s proposal will be presented to finance
ministers of the G-20 in Washington next week.
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