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Covid-19 costs will boost demand for new rules on digital tax, says OECD

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Secretary-General of the OECD Angel Gurria

Secretary-General of the OECD Angel Gurria

REUTERS

Secretary-General of the OECD Angel Gurria

The needs of governments around the world to find tax revenue to plug budget holes caused by coronavirus boosts the case for co-ordinated digital taxation, according to the Organisation for Economic Co-operation and Development (OECD).

"We will all be heavier with debt - debt of governments, debt of companies and debt of households," OECD secretary-general Angel Gurria said at a Bloomberg Invest Global virtual conference.

"Post-Covid, everybody's going to be looking for money and the best thing that can happen to these companies is to have legal certainty."

The Paris-based body, which co-ordinates a group of the world's wealthiest economies, including Ireland, is at the epicentre of an international effort to harmonise tax rules for digital companies, shifting taxation to the place where users of a service are located.

But the US opposes the drive, arguing digital taxes unfairly discriminate against American firms, and has threatened retaliatory tariffs which could exacerbate the worst global downturn since the Great Depression.

"This will not work if everybody's not on board," the OECD chief said. "The last thing you want is for this to be all over the place."

The US withdrawal from the OECD tax process is a particular blow to Ireland. Successive governments here have argued against tax harmonisation at EU level by channelling such moves through OECD processes, including regarding so-called base erosion and profits shifting (Beps) and more recently in relation to taxing the digital economy.

The exit of the US from the OECD's rule-making process will make it harder to convince EU members such France not to act unilaterally to tax what, in many cases, are US technology companies with substantial Irish operations.

Additional reporting: Bloomberg

Irish Independent