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A collapse of global tax talks could cost $100 billion, says OECD

Public pressure is growing on big, profitable multinationals to pay their share under international tax rules after the Covid-19 pandemic strained national budgets

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OECD | Global economy

Reuters  |  Paris 

tax, taxes
The aim is update international tax rules for the age of digital commerce

PARIS (Reuters) - The could shed more than 1% of output if talks to rewrite cross-border tax rules break down and trigger a trade war, the said on Monday, after countries agreed to keep up negotiating to mid-2021.

Nearly 140 countries agreed on Friday to extend talks after the pandemic outbreak and US hesitation before the presidential election squashed hopes of reaching a deal this year.

Public pressure is growing on big, profitable multinationals to pay their share under tax rules after the Covid-19 pandemic strained national budgets, the countries said in an agreed statement.

The aim is update tax rules for the age of digital commerce, in particular to discourage big Internet companies like Google, Facebook and Amazon from booking profits in low-tax countries like Ireland regardless where their customers are.

 

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In the absence of a new international rulebook, a growing number of governments are planning their own digital services taxes, which has prompted threats of trade retaliation from the Trump administration.

"In the 'worst-case' scenario, these disputes could reduce global GDP by more than 1 per cent," the OECD, which has been steering the global tax talks, estimated in an impact assessment.

Inversely, new rules for digital taxation and a proposed global minimum tax would increase global corporate income tax worldwide 1.9% to 3.2%, or about $50 billion to $80 billion per year.

That could reach $100 billion when including an existing US minimum tax on overseas profits, amounting to 4% of global corporate income tax, the said. Meanwhile, any drag on global growth would be no more than 0.1% in the long term

While countries agreed on blueprints for a future deal, the key remaining issue to be solved was the scope of businesses to be covered, which would then make it easier to agree the technical parameters, OECD head of tax Pascal Saint-Amans said.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Mon, October 12 2020. 18:35 IST
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