Tech giants face higher tax bills under shake-up

New tax plans aimed at making global firms pay more tax have been published by an international economic body.

The proposals would give governments more power to tax big technology firms such as Apple, Facebook and Google.

The Organisation for Economic and Development (OECD) proposals would mean big companies paying more tax where they sell products and make profits.

Multinational companies could be liable for tax in places where they have no physical presence.

Companies that do business in more than one country have long been a challenge for tax authorities.

There is a very obvious incentive to structure their business in a way that minimises their tax bills.

Typically that involves allocating profits to subsidiaries in countries - including so-called tax havens - where corporate tax rates are very low even if they do little business there.

The issue has been highlighted by the growth of big technology companies which can provide services in countries where they have little or no physical presence.

The OECD's proposal includes new rules on where tax should be paid and on the proportion of their profits that should be taxed in each country.

The OECD is an organisation whose members are mainly rich countries, although its work on corporate tax brings in a much wider group, a total of 134 countries and jurisdictions.

The organisation's Secretary General Angel Gurria said:

"We're making real progress to address the tax challenges arising from digitalisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system".

A number of countries, including France and Britain, have been making their own plans to introduce digital services taxes.

The British proposal would affect companies providing social media platforms, search engines or online marketplaces.

It is scheduled to come into effect in April 2020 but the government said it would rescind it if "an appropriate international solution is in place".

The French tax is already in force, though Paris plans partial refunds if companies pay more under the current regime than they would have been liable for if there is an international agreement.

There are concerns that such unilateral measures could aggravate international economic tensions at a time when they have already been raised.

US companies would be particularly affected by these measures.

Washington trade officials have argued that the French tax unfairly targets American companies and are investigating it under a procedure that could ultimately lead to retaliation in the shape of tariffs on French goods.

So Mr Gurria clearly wants to get an international agreement done soon. He said: "Failure to reach agreement by 2020 would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy."

The proposed measures have been criticised by campaigners.

Alex Cobham, chief executive of the Tax Justice Network said :"The OECDs proposals bring more complexity for tax abusers to hide behind, fail to meaningfully curb corporate tax abuse and will shrink the tax revenues of lower-income, non-OECD member countries that currently suffer losses most intensely from corporate tax abuse."

The OECD proposals would need to be agreed by governments to come into force. The international organisation has launched a public consultation.