Palo Alto group delivers objections to OECD’s tax planning proposals

Biggest firms stay silent but Digital Economy Group complains of ‘disparaging assertions’

Facebook, along with Google and Microsoft, did not respond to the OECD’s draft report. Photograph: Reuters/Thomas Hodel

Facebook, along with Google and Microsoft, did not respond to the OECD’s draft report. Photograph: Reuters/Thomas Hodel

Sat, Apr 19, 2014, 01:00

The Organisation for Economic Co-operation and Development’s tax base erosion project can produce a lot of abstruse language but it feeds into a pretty controversial debate about mega-profitable technology companies gaming the global tax system.

One of the strands to the work is consideration of the challenges the so-called digital economy creates for the world’s tax authorities. While consideration is being given to special measures to tax the digital economy, most voices seem to be against this for practical and philosophical reasons.

The OECD issued a draft report and sought responses and these are now available on its website. The parties that made submissions range from individuals to global accountancy firms but notable by their absence are any of the world’s great tech firms, such as Microsoft, Google or Facebook.

Politicians in European countries such as France and the UK are miffed at the way sales in their countries by Microsoft, Google and Apple, among others, are booked in low-tax Ireland. Others have expressed outrage at the way IP rights are used to ensure much of this business goes untaxed in Ireland, because the money is made flow on to such places as no-tax Bermuda.

The Palo Alto-based Digital Economy Group, which has made a submission to the OECD, represents the views of leading “software, information/content, social networking, and e-commerce companies”.

The group’s main argument is that the concerns of the big economies should be address by VAT. Consumption taxes on digital supplies to consumers most appropriately address the tax challenges of the digital economy, the group says, as they “level the playing field between resident and non-resident suppliers of digital goods and services”.

There is no mention, surprise, surprise, that consumption taxes are of course paid by the punter as against the multinationals the group represents.

Not only that, but the group takes umbrage at “disparaging assertions” made by the OECD concerning aggressive tax planning by tech multinationals. It respectfully recommends that such suggestions be removed from the debate, as such attitudes have no place in discussions about policy choices.

The group’s problem is that it is the outrage of the punters when they read of tech companies sending their profits off to sit in bank accounts in the Caribbean, that is driving much of the OECD/G20 debate on the issue in the first place. We shall see.

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