Sunday 23 February 2020 6:25 pm

France warns of tech tax chaos if global deal not reached this year

Failure to reach a global agreement on how to tax tech giants such as Google and Facebook would lead to a chaotic mix of different tax regimes, France’s finance minister has warned.

Bruno Le Maire today called on international leaders to reach a consensus over tax reform by the end of the year or risk a global patchwork of conflicting systems.

“Let’s be clear — either we have at the end of 2020 an international solution clearly in the interest of all countries and digital companies, or there is no solution and then it will be up the national taxes to enter into force,” he told Reuters.

The Organisation for Economic Cooperation and Development (OECD) is plotting a global policy to make digital companies pay tax in where they do business, rather than where they are registered.

It comes in response to concerns that tech giants are avoiding paying their fair share of tax by basing their companies in low-tax areas such as Ireland.

But the plans have been met with opposition in the US, with President Donald Trump arguing that they unfairly targeted American companies.

The proposals could also be scuppered by unilateral laws in specific countries. France has already adopted its own digital tax, but has suspended it until the end of the year pending a global solution. The UK is set to roll out a similar levy from April.

However, finance ministers and central bank governors from the world’s 20 largest economies — the G20 — today met in Riyadh for talks on global economic issues, with digital tax at the top of the two-day agenda.

“For the first time there is wide consensus among the G20 members on the necessity of having a new international taxation system,” Le Maire said.

“We have to address the issue of digital companies making profits in many countries without any physical presence, which means without paying the due level of taxes.”

He added: “And we also have to address the key question of minimum taxation and the risk of having a race to the bottom on taxation.”

Despite Le Maire’s bullish tone, Japanese finance minister Taro Aso took aim at the US for proposing tax reforms that could undermine global negotiations.

The OECD’s plans were stalled last year by last-minute changes demanded by Washington, including a so-called safe harbour regime which critics say would allow multinational tech firms to bypass any new laws.

“I told my counterparts that Japan is very concerned about the safe harbour proposal,” Aso told reporters. “It would extremely diminish the regulatory effect of what we’re trying to do. That is a view expressed by various countries.”