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Can world agree on digital tax scheme targeting IT companies? Updated: 2019-10-18 04:20:08 KST

Can countries around the world agree on a revolutionary plan to force global tech giants to pay their fair share of taxes?
That is the question as the OECD this week submits a proposal aimed at overhauling current global tax rules, which digital giants like Google, Facebook, Amazon and Apple have largely been criticized of abusing to dodge taxes.

The key idea is to allow governments to impose additional taxes once sales revenue made within their borders exceeds a certain level even if the firm does not have a physical office, intellectual property or tangible assets in the country such as a server.

"The current nexus rule based on permanent establishments has allowed digital businesses to easily shift profits made from their biggest markets to countries where corporate tax is low. As they're digital, their costs are limited and turn to zero which means they're generating huge profit while paying little to no corporate taxes. It is also difficult to obtain detailed financial information on their earnings."

This year, European countries began taking significant steps towards adopting digital taxation systems of their own, with France's three-percent tax on sales paving the way.
The UK, Spain, India and Kenya are considering or moving to emulate the measure.
U.S. tech giants and President Donald Trump have slammed such initiatives.
Korea is also looking to update its tax rules, but with homegrown digital firms like Naver and Kakao, there have been concerns of double taxation.

"Our IT and gaming firms, in particular, could be disadvantaged under the OECD proposal. They already pay a high rate of corporate tax in Korea so the burden of extra duties could dampen business growth, and actually reduce revenue for the government as it would likely expand tax waivers for those firms. That's why digital tax allocation needs to be carefully and accurately designed."

Experts say even IT firms accept there will have to be some kind of compromise.
But reaching that point won't be easy.

"The framework should clarify new rules of allocation but leave room for each nation to specify the details as market conditions differ greatly. Firms should also be willing to get on board the aim isn't to create winners and losers. So countries should not push forward with nationalistic agendas. Cooperation and sharing of financial information is crucial for progress."

The OECD aims to reach an agreement by 2020.
Oh Soo-young, Arirang News.
Reporter : osy@arirang.com
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