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Proposals to Tax Digital Giants Surface Worldwide

Governments across the globe are increasingly considering new ways to tax digital advertising revenues.

The Organization for Economic Development and Cooperation (OECD), for example, has floated a proposal for its 130 member countries. Various European countries, meanwhile, says they are working on their own proposals as contingency plans in the event that the OECD proposals do not materialize. Southeast Asia countries have already implemented a tax program. Meanwhile, closer to home, a proposal is being considered by the Canadian parliament. In the U.S., a proposal to tax digital advertising as way to raise funds to support local publishers is being considered.

The OECD proposal seeks to increases taxes imposed upon the largest and most successful digital companies, such as Facebook and Google, in large part by restricting a popular corporate shell game that involves multinationals shifting profits to countries such as Ireland that have low tax rates. According to Bloomberg Tax, the proposal is the first stab by the OECD to develop a tax structure that would target digital companies. The organization maintains that large corporations may pay little or no tax, even in countries that have a large number of consumers. Therefore those corporations may still be able to provide digital companies with large amounts of revenues.

The proposal would also ensure that large corporations pay a minimum global tax. Much work is required, however, to get the proposal enacted, in part because the OECD will need to build a consensus among its 130 member countries.

In the meantime, individual countries in Europe are working on their own plans to tax big tech companies. France has signed a law that imposes a 3% tax on revenues that exceed a certain threshold earned by U.S. corporations, such as Facebook, Google, Amazon, Twitter and Uber, according to BizCommunity. Those companies have avoided paying taxes in the country by claiming their products are “virtual services” and by using clever accounting. Britain, for its part, has announced it plans to slap a 2% tax on digital companies.

Proposals to increase taxes on big digital companies are surfacing in Asia, too. So reports Reuters. Indonesia has reportedly joined forces with Thailand, Vietnam and the Philippines to increase taxes on Google, Facebook and other big digital companies while also demanding that the same companies take action to regulate content, in large part, to curtail fake news. In a related matter, Thailand has called for increased discussion on how to ensure big internet firms make financial contributions, either through taxes of special fees. In the meantime, the Association of Southeast Asian Nations, which consists of 10 countries, is expected to have its council of telecom regulators adopt a proposal in November that will require internet firms to make financial contributions.

Canada’s Prime Minister Justin Trudeau and his Liberal party are also proposing to enact a tax on digital companies, reports MNE Tax. The proposal would implement a 3% tax on income of large businesses operating in the digital economy and is intended to copy the new tax in France. Canada would only apply the tax on companies with more than USD $1 billion in worldwide revenues USD $43.8 million in Canadian revenue. The Liberal Party has also pledged to crack down on the use of tax loopholes associated with corporate debt that allow business to lower their taxes.

On a smaller scale, the Colorado Media Project is proposing a tax on sales of digital advertising that targets Colorado residents. Proceeds from the tax will be used to prop up the ailing news industry, reports the Missoula Current.

The proposal could help reverse a trend of local newspapers collapsing with more than 30 newspapers in the state having folded in the last two decades. The state’s constitution, however, requires voters to approve new taxes, which could be an obstacle to the proposal being implemented. Additionally, some observers question if having the state subsidize the media could hinder the media’s role in reporting objectively on government matters, although supporters of the proposed tax say National Public Radio and the Public Broadcasting System already receive government funding.

 

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