Silicon Valley is about to lose a battle in its war against paying tax on big-tech revenues
- The Organisation for Economic Cooperation and Development (OECD) on Wednesday outlined a huge overhaul of tax rules which would hit the tech giants with much bigger tax bills.
- Multinationals like Google and Facebook can reduce their tax burdens by filing in low tax countries like Ireland.
- Countries such as France have been pushing for stricter rules which would force the tech giants to pay more tax.
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Governments will get more power to tax big multinationals doing business in their countries under a major overhaul of decades-old cross-border tax rules outlined on Wednesday by the Organisation for Economic Cooperation and Development (OECD).
The rise of big internet companies like Google and Facebook has pushed current tax rules to the limit as such firms can legally book profit and park assets like trademarks and patents in low tax countries like Ireland regardless of where their customers are.
Earlier this year more than 130 countries and territories agreed that a rewriting of tax rules largely going back to the 1920s was overdue and tasked the Paris-based OECD public policy forum to come up with proposals.
The issue of taxing big cross-border multinational firms has become all the more urgent as a growing number of countries have adopted plans for their own tax on digital companies in the absence of a global deal.
"The current system is under stress and will not survive if we don't remove the tensions," OECD head of tax policy Pascal Saint-Amans told journalists on a conference call.
Some OECD countries have been pushing for the tech giants to pay tax in all countries where they have users. France in particular has been vocal on the subject, proposing a digital services tax which would levy a 3% tax on French sales for a select group of 30 companies including Facebook, Google, and Amazon.