US Against Taxation Laws Targeting Online Companies

  • Posted by admin
  • 27 September 2013
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In a major win for online and ecommerce companies such Google and Amazon, USA has opposed any stringent taxation rules targeting online digital enterprises which were to be presented in this month’s G20 summit. The US’s stance has brought it at odds with many member states, particularly France which has been aggressively seeking support to strengthen tax laws for regulating online financial activities. Senior White House officials had recently made it abundantly clear that they will not tolerate tax rules which were only designed to target some of the fastest growing companies in the US.

The task to come up with an action plan for implementing new tax regulation had been allotted to OECD (Organization for Economic Cooperation and Development) which were to be discussed at the G20 summit; however both the US and France have been unable to find common grounds as of yet with regards to taxes on online business activities. In fact the OECD plan was been looked at as the biggest and most ambitious undertaking to overhaul international tax regulation since the First World War.

The US is in favor of pushing for moderate changes, rather than complete rewording of the existing laws. US representatives are requesting that the current legislations be tweaked rather than traded for entirely new paragraphs which will dictate how the digital economy will be taxed.

France on the other hand has been very aggressively seeking support for radical proposals revolving around entirely new tax rules. The new rules are apparently designed to counter some of the measures that are being used by large online companies such as Google to avoid certain taxes. Even though France has been unable to win US support for its tax laws, the French finance minister – Pierre Moscovici continues to push for the reforms.

The OECD is expected to draw up an action plan for up to 15 areas where action can be taken. Rules pertaining to the jurisdictions of a multinational company and for what specific business activities should it pay tax are one of these reforms and are also expected to take the longest to implement. Corporations such as Google are known to exploit loopholes in this area in order to conduct business without needing to pay taxes on them.

While this particular concern has been voiced time and time again by politicians from around the world, none have managed to find a common stance on delimiting the laws which will regulate such business activities. Because of this, whatever reforms the OECD will suggest is expected to contain only moderate suggestions which will please all parties involved.

Even so, the OECD has declared that tax engineering, as carried out by large online ecommerce companies is one of the six important points that it will try to address. How it will do so although remains to be seen. It had in February stated in a report that “Nowadays it is possible to become heavily involved in the economic life of another country through the internet without having any taxable presence there”. This has of course some countries very worried.

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