October 21, 2020

OECD postpones negotiations on taxation to digital giants to mid-2021




The Organization for Economic Cooperation and Development (OECD) has failed to reach an agreement on the new international framework that will support the new taxation of digital giants, which is why it has postponed the end of the negotiations in mid-2021, according to reported this Monday in a statement.

The OECD, which coordinates the negotiations between 135 countries to reach an agreement on the taxation of digital activities, presented its proposals for digital taxation on Monday. The entity chaired by the Mexican Ángel Gurría will present the documents to the G-20 at the meeting that the ministers of Economy and Finance and the governors of the central banks will hold this week.

In Spain, the Senate approved on the 7th of this month the bills on the tax on Certain Digital Services. “The objective of the Government is to adapt the Spanish tax system to the new digital business areas that are not currently well reflected in the current tax framework.” The Spanish Government expects to collect about a billion euros with this tax.

The OECD has stressed that no agreement has yet been reached, although it hopes that they will serve as a basis for steering negotiations in the future.

The commitment of the OECD and the countries that are part of the initiative was to reach a proposal agreed upon and accepted by all by the end of this year. However, the OECD estimates that the negotiations will not be completed until mid-2021.

“We agree to quickly address the remaining issues with an eye toward bringing this process to a successful conclusion by mid-2021 and resolving technical issues, developing draft legislation, guidelines and international rules and processes as necessary to implement a consensus-based solution. », Explained the OECD.

The agency has urged governments to adopt an agreement in the face of the challenges posed by the Covid-19 pandemic, since the implementation of this agreement will help raise tax revenues, something that will be necessary when countries have to restore their public finances .

According to OECD calculations, his proposal will raise corporate income tax revenue worldwide by between 42,283 and 67,654 million euros. If the joint effect of the proposals with a parallel US tax plan is taken into account, tax revenues could rise up to 84,567 million euros per year.

The OECD estimates that the implementation of a multilateral agreement will have a negative effect of less than 0.1% of world gross domestic product (GDP) in the long term. However, the fiscal certainty from this agreement could boost investment and growth, which would “partially or fully” offset this “small negative effect”.

The Paris-based body has argued that the approval of this agreement could reduce the need for governments to be forced to raise other types of taxes to balance their finances in the future.

“The absence of a consensual solution would probably lead to the proliferation of unilateral and uncoordinated fiscal measures, as well as an increase in harmful fiscal and commercial disputes,” the institution warned.

In this sense, Gurría added that “it is imperative to do this work to the finish line, since a failure would threaten that fiscal wars lead to trade wars at a time when the global economy is already suffering greatly.”

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