Picture: BLOOMBERG/KRISZTIAN BOCSI
Picture: BLOOMBERG/KRISZTIAN BOCSI

Paris   — The Organisation for Economic Cooperation and Development (OECD) is working on plans for a minimum corporate tax rate as part of a global revision of tax rules for the digital era, it said on Tuesday.

The emergence of digital giants such as  Google and Facebook has pushed international tax rules to the limit because they can book profits in countries with the lowest taxes no matter where the customer is.

About  127 countries and territories agreed last week that a planned revision of global tax rules by 2020 would tackle some of the most vexed issues, such as how to divide up the right to tax digital firms’ cross-border income between countries, the OECD said.

Under a proposal from France and Germany, they also agreed to look at ways to give countries more leeway to tax revenue booked in other countries with no or low tax.

“We are working ... on the concept of a minimum tax, we are exploring aspects and we will certainly take into account and may be informed by the experience of the US,” said OECD head of international co-operation Achim Pross.

The OECD, made up of 36 states with advanced economies, does research and helps member countries draw up economic policies.  Cross-border taxation is one of its focuses.

The Trump administration’s 2017 tax overhaul included a provision meant to discourage multinational corporations from avoiding US taxes by holding intangible assets such as software patents abroad in low-tax countries.

The provision for global intangible low-taxed income, or GILTI, imposes an effective 10.5% tax rate on income from tax havens.

Meanwhile, France is using its year-long presidency of the Group of Seven economic powers, which started in January, to push for an agreement on a minimum corporate tax.

“Governments must be able to tax companies in countries with excessively low taxes,” French finance minister Bruno le Maire said on Twitter, welcoming the news from the OECD.

In the absence of international rules preventing firms from shifting profits to low-tax countries, a growing number of countries are creating their own national taxes specifically targeting big digital firms.

Britain, France and Spain are going ahead with such plans, while the broader European Union is struggling to agree a bloc-wide levy by March.

Reuters