Governments would be able to tax a to-be-determined portion of firms’ worldwide earnings, even if they do not have a physical presence in the country, according to a consultation document released Wednesday. The measures would apply to companies with revenues of more than US$821 million that operate across international borders and have a “sustained and significant involvement in the economy.” The OECD is also proposing a “legally binding” dispute-settlement mechanism to arbitrate between companies and governments. (The Logic)
Talking point: The proposals are designed to stop governments from creating a fragmented taxation system by imposing country-specific levies on Big Tech, which France has passed and officials in the U.K. and Canada’s Liberal Party are considering. The Trump administration has opposed the French measure, threatening retaliatory tariffs. But the OECD measure is not restricted to the tech giants, most of which are run from California—for example, the U.S. would be able to impose higher taxes on the American sales of luxury brands, some of which are based in France. Those kinds of trade-offs are designed to encourage a quick consensus on the new approach to taxation. The OECD document states it needs agreement on the types of rules countries are willing to set by January 2020 so it can set the specific revenue thresholds and tax levels by the end of 2020.