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Why these countries boost taxes on digital economy

The Organization for Economic Cooperation and Development (OECD) proposed to impose taxes on large technology companies such as Apple, Google, Amazon and Uber and initiated a consultation that will end on November 12, 2019. In addition, the finance ministers of the G20 will decide how large multinationals will pay their taxes and are scheduled to meet in Washington on October 17 and 18, where they will jointly review the proposals made by the OECD in order to evaluate a new tax system applied to the digital economy.

What is going on in France?

France passed its own law in 2019 to apply a tax to the most important digital internet companies such as Google, Apple, Facebook or Amazon. The situation was not to the liking of the United States and Donald Trump went to the crossroads to defend American companies. The OECD’s argument is that tech giants must pay taxes on their accumulated income, as a way to avoid looking for countries where legislation favors corporate profits.

One of the proposals pointed out by the OECD is: “Companies will pay their fair share wherever they have activities and where they obtain benefits. Countries that currently cannot tax digitals may do so”.

In this situation, the agency issued on Wednesday, October 9, a proposal that highlighted the current rules, which date back to the 1920s, “are no longer sufficient to guarantee an equitable allocation of tax rights in an increasingly world globalized”.

A global restructuring of corporate taxes is proposed and the entity expresses it by saying that large multinational and highly profitable companies, including technology companies, pay taxes wherever they have important activities for consumers and generate their profits.

Therefore, the agency informed, considers the work composed of representatives from 134 countries and territories, whose suggestions were analyzed on equal terms. In addition, the OECD intends to present its proposal at the next meeting of finance ministers and central bank governors of the Group of 20.

Recently, the OECD will submit its proposal for public consultation next November. It aims to achieve a joint approach in January 2020 and approve the measure by the end of 2020.

The situation in Mexico

For its part, Mexico contemplates in the Income Law of the Economic Package 2020 the collection of digital taxes for Uber, Rappi or Airbnb. The Secretary of the Treasury Arturo Herrera rejected the proposal in the case of new taxes. He said, it was something contemplated but he was not charging.

This document will be presented at the next meeting of central bank ministers of the G20 to be held in Washington on October 17 and 18. In addition, it will be discussed in a public consultation scheduled for December 2019.

The perks or not so much…

Also, the OECD document proposes to prevent benefits from being diverted to countries with more favorable tax treatments and to maintain transfer prices, therefore, it suggests implementing mechanisms for the prevention and resolution of “legally binding and effective” conflicts to which Governments and multinationals may have access to a conflict.

With this new paradigm, countries that are large markets such as: Germany, Spain or France win. The initiatives promoted by the G20 and the OECD, summarize the spirit of several countries that are affected by not having legislation to force the tax collection of the digital economy.


Also published on Medium.

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