US offer on global taxation deal would tie levies to revenue

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The US is proposing that countries should be able to tax more corporate profits based on revenues within their borders in a bid to reach a global taxation deal, according to two people familiar with the offer. The US sent a proposal to the nearly 140 countries participating the Organization for Economic Cooperation and Development’s talks on digital taxation and global minimum levies, an offer that could help move previously stalled negotiations to consensus.

The plan calls for the taxing rights to be allocated based on a formula that accounts for revenues generated within a specific country, according to the people, who requested anonymity because the document is not yet public.

The quantitative proposal is a departure from current options, which attempt to define which business models and industries are subjected to the tax, with an emphasis on technology and other businesses that interact with consumers. The US proposal would be formulaic and apply to multinational companies across industries, not just digital firms. The US had resisted suggestions from other countries to limit the rules to digital businesses, which it says would target US technology giants including Google, Facebook and Amazon.com. The American proposal was reported earlier by the Financial Times.

Companies that fall within the scope of the OECD’s plan would see some of their profits taxed by many more countries than they do now. They would pay more tax in countries where they have users or consumers, and less in the country where they’re headquartered, assuming those are not one and the same. The plan wouldn’t necessarily raise companies’ taxes, but change where some of their profits are taxed.

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