OECD says digital tax could reduce tensions in global GDP by 1%


French President Emmanuel Macron nodded during a meeting with US President Donald Trump on December 3, 2019, before the NATO summit in Watford in London, UK.

Kevin Lemerke | Reuters

LONDON – Tensions over a digital tax could trigger a trade war that could potentially cut global GDP (GDP) by more than 1% each year, the OECD warned on Monday.

The United States, France, the UK and Ireland – just to name a few of the nations involved in the long-running dispute – have fought over how to adapt the tax system to the new digital economy, where Apple, Facebook and There are companies like Amazon. Flourished The debate has received more attention in the wake of the coronovirus epidemic as tech giants have benefitted from orders to stay home.

The Organization for Economic Cooperation and Development (OECD) has warned that countries need to come to an agreement or risk further damage to the global economy.

“The absence of a consensus-based solution … unilateral digital service can lead to the proliferation of taxes and an increase in tax that harms tax and trade disputes,” the Paris-based institution said in a statement on Monday.

“In a worst-case scenario – the global trade war has begun with unilateral digital service taxes – failure to reach agreement could reduce global GDP by more than 1% annually,” the OECD said.

The OECD was tasked to bring nations together on a common international approach to digital taxation. The job became difficult as the epidemic halted face-to-face meetings, but it was also set back by the US decision to opt out of negotiations in June.

As a result, the OECD confirmed on Monday that there would be no agreement this year – as initially determined. Instead, the organization is now “aiming to reach an agreement by mid-2021.”

The European Commission, the European Union’s executive arm, has said it will seek an EU-wide digital tax if it does not make a deal at the OECD by the end of 2020.

In addition, countries such as France, UK and Spain are expected to start collecting the first receipts of their national digital taxes in the first half of 2021. The latest comment of the OECD raises questions on what this government will do in this context.

Meanwhile, the OECD has introduced a new set of technical principles that, if implemented, could bring in $ 100 billion in additional tax revenue worldwide.

OECD Secretary General Angel Guria said on Monday, “It is imperative that we take this work across the finish line. Failure will turn into trade wars at a time when the global economy is already suffering on a large scale.”

According to forecasts made by the OECD in September, the global economy is expected to contract by 4.5% this year.

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