US tech giants such as Google and Facebook could face a $28bn (£20bn) bill as part of radical plans to overhaul global corporation tax, new research has revealed.
The Organisation for Economic Cooperation and Development (OECD) last week agreed on a new tax model to ensure companies pay tax in countries where they earn revenue, building on a plan inked last month by the G7.
Major tech firms will account for almost half — or $39bn — of the estimated $87bn that will be brought in under pillar one of the proposals, according to Oxford University’s Centre for Business Taxation.
The report, first reported by the Daily Telegraph, added that Apple, Microsoft, Google owner Alphabet, Intel and Facebook will pay $28bn between them.
But the pillar one reforms, which are aimed at making firms pay tax in the countries where they have users, are only set to apply to 87 of the world’s 500 biggest companies.
This is because the tax only applies to firms with revenue of more than $20bn and a profit margin higher than 10 per cent, while miners and financial services companies are also excluded.
“This is a very significant development in principle, because we’ve never before tried to tax profit in the place of sales,” said Michael Devereux, a co-author of the research.
“Now we’ve got an agreement that we’re going to do that but this is only going to apply to 80 or 100 companies. So we’ve made a very, very tentative step along the way towards taxing profit in the market country.”
The research found that US firms will account for almost two-thirds of the tax charged under pillar one of the OECD reforms, suggesting the plans could face fierce opposition from Congress.
Under pillar two of the reforms, a minimum corporation tax of 15 per cent will apply to multinational companies with revenue over €750m (£652m).
If the threshold for the pillar one reforms was lowered from $20bn to the same level it would lead to a thirteen-fold increase in the number of companies targeted, the research added.