More than 130 countries have given up on agreeing on new taxation rules this year for global tech giants like Google LLC and Apple Inc. due to disagreements over U.S. proposals and the coronavirus pandemic, with the Organisation for Economic Cooperation and Development saying Monday it will seek a deal by mid-2021.
The countries originally aimed to release a final report by the end of the year, responding to criticism that such technology companies, also including Facebook Inc. and Amazon.com Inc., are avoiding paying their fair share of taxes by taking advantage of low-tax jurisdictions.
"We will now focus on resolving the remaining political and technical issues," the OECD said in a report, as differences have emerged between the United States, which opposes targeting American companies, and European nations pressing for taxing such businesses appropriately where they make huge profits.
"We agree to swiftly address the remaining issues with a view to bringing the process to a successful conclusion by mid-2021," the Paris-based body said.
Their work has also been delayed due to the pandemic. But the report said the global health crisis has made such tax rules even more necessary as governments have been forced to provide unprecedented levels of financial support to their economies.
The "time will come when governments will need to focus on putting their finances back on a fair and sustainable footing."
Including the 37 OECD members, 137 countries and regions have joined the framework to implement the OECD and Group of 20 major economies' Base Erosion and Profit Shifting project to combat multinational tax avoidance.
The existing taxation rules are based more on where companies' permanent offices and plants are located rather than where they make their sales.
Under the envisaged rules, global tech giants that generate revenue by offering consumer products or digital services will be taxed based on their sales, even in countries where they are not physically present.
The countries are expected to continue to discuss technical issues such as the scope of taxable profits and tax rates.
Another sticking point is whether the new system should be mandatory.
Differences remain among the countries after the United States sought to set a "safe-harbor" condition, which would allow companies to still choose to operate under the current taxation rules.
In an online press conference, OECD Secretary General Angel Gurria said, however, "The United States has been working with us and has added its technical competence, expertise to the work."
In separate reports containing draft digital taxation rules, the OECD said the system would cover such businesses as online advertising services, online search engines, social media platforms and online gaming.
The organization also estimated that the new rules could increase global revenues from corporate income tax by up to around 4%, or $100 billion, annually.
The OECD said in January that the 137 countries had broadly agreed on an outline of new taxation rules for companies operating in the digital space globally, while adding that "significant divergences" remained.
In a related move, the G20 finance ministers and central bank governors will hold a teleconference Wednesday.
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