OECD chief warns of trade war over tax plans after international deal stalls

Tue 1 Nov 2022
Posted by: Phillip Adnett
Trade News

OECD tax chief warns of trade war in digital services

The mastermind behind the OECD’s radical plans to overhaul global corporate taxation has predicted that the US and Europe could return to trade wars if the tax regime is not implemented.

Pascal Saint-Amans, who was head of the tax department at the OECD, devised the reforms which aim to address public concerns that multinationals are not paying a fair rate of tax.

Saint-Amans told the FT: “I see some serious risks of unilateral measures, and therefore trade sanctions, at a time when countries which are allies, in a difficult political context, may not want to trigger trade wars for a tax issue.”

Tax delayed

Elements of the international deal have encountered complex technical issues, leading the OECD to delay implementation of rules on where companies are taxed until 2024, reports Bloomberg.

The US is unlikely to implement the measures to force companies to pay more tax before mid-2023, although Saint-Amans said it would likely happen or Big Tech companies could face a web of separate digital services taxes from multiple countries.

In the past, the US has threatened to impose sanctions on European countries that introduced digital services taxes.

A section 301 report by the US Trade Representative claimed that foreign digital taxes discriminated against big US tech firms, such as Google, Facebook, Apple and Amazon.

Another part of the OECD deal, which imposes a 15% lower limit on corporate tax rates for multinationals with revenues over €750m, has also stalled.

The US attempted to introduce it earlier this year but disregarded important elements of the rules, while Brussels has faced opposition from Poland and Hungary.

Saint-Amans said that some countries, such as Germany could go it alone if hold ups continued.

Digital tax regime

The EU has published details of the reboot of its ecommerce rules in the form of the Digital Services Act (DSA), reports TechCrunch.

The rules are intended to drive accountability online by streamlining how platforms and marketplaces must tackle illegal content, goods and services, as well as bringing in specific provisions for larger platforms that are aimed at increasing transparency around their algorithms.

The bulk of the DSA provisions will apply from January 1, 2024, with firms facing penalties up to 6% of global turnover for breaches.

The regulations specify platforms that are designated as ‘very large online platforms’ if they have monthly users of more than 45 million within the EU, reports lawyers Pinsent Masons, who give an explanation of the scope of the new rules.

A sister regulation, the Digital Markets Act, which targets Big Tech will also start to apply from early next year.

The new Regulation aims to put an end to unfair practices by companies that act as gatekeepers in the online platform economy.

The DMA defines when a large online platform qualifies as a “gatekeeper”. These are digital platforms that provide an important gateway between business users and consumers – whose position can grant them the power to act as a private rule maker, and thus creating a bottleneck in the digital economy.

To address these issues, the DMA will define a series of obligations they will need to respect, including prohibiting gatekeepers from engaging in certain behaviours.