The OECD will propose a reform to tax digital giants from 2021

The Organization for Economic Co-operation and Development, in other words the OECD, which brings together the 37 most developed countries in the world, is preparing to reform the taxation of digital giants and, in particular, their tax evasion. This reform, mentioned at the beginning of October, will finally be the subject of extensive work from mid-2021, according to the organization.

The future reform could be a tax base for GAFA

The OECD projects are based on a two-pillar approach to future reforms. The framework for taxing digital giants will therefore include, on the one hand, the geographic link in terms of sales recorded by companies and, on the other, a minimum tax. These pillars could also be a basis for the future development of a “GAFA tax”, although the negotiations on this topic have just failed. That will not prevent France from applying it at the end of the year.

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Paul McCullough, an OECD labor financial analyst, said that “since profit is generated by the consumer element of the economy, that portion should be included in the calculation of profit.” According to him, a company that sells in a country other than that of its origin must allocate part of its profits to the jurisdiction of that country.

The OECD is based on these pillars

The OECD is interested in the two pillars mentioned above for its reform and therefore seems to be in favor of a multilateral solution. Specifically, the first pillar, namely a change in the distribution of tax rights, would mean a slight increase in tax revenues at global level.

According to the OECD, the second pillar would lead to a greater increase in corporate tax revenues. This tax would also reduce the profit transfers of multinational corporations to low-tax countries and jurisdictions.

According to the OECD, the unification of the two pillars would again lead to a more favorable environment for investment and growth. Finally, the finance ministers of the G20 member states have committed to continue their efforts and research on these two pillars in order to arrive at a consensual and global proposal by the middle of next year.

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