Governments to launch overhaul of international tax rules: sources

PARIS (Reuters) – Tax officials from nearly 140 governments are set to commit on Thursday to a rewrite of cross-border tax rules despite little progress narrowing deep differences, two delegates attending the meeting in Paris said.

The Organization for Economic Cooperation and Development (OECD) has called a news conference on Friday to present the outcome of the talks this week at its Paris headquarters.

“They are probably going to put out a statement focusing on points of convergence. But there is still huge divergence of views,” one delegate told Reuters during a break from meeting.

Another delegate concurred, saying that although the Paris meeting would yield a consensus to push ahead, there was little assurance technical details could be hammered out in the coming months.

“It’s really a case where the devil is in the details,” the second delegate said.

Following the green light at the Paris meeting, governments will have to dive into negotiations on issues like specific thresholds for a company’s taxable presence in a country and whether to include an opt-in/opt-out mechanism.

The emergence of big tech companies like Amazon Inc (O:), Facebook Inc (O:) and Alphabet Inc’s Google (O:) has pushed existing international tax law to the limits, because companies can book profits in low-tax countries like Ireland regardless where their clients are located.

With a number of countries preparing national digital services taxes in reaction, pressure is building to resolve the hugely complex technical issues within a matter of months, possibly as soon as by mid-year.

The delegates said that would overcome differences not only over how to allocate tax rights to governments but whether certain industries like the financial sector should benefit from a carve-out from the future rules. The OECD has proposed that only extractive and commodity companies should be out of the scope of future rules.

The delegates also said that there was widespread opposition to a U.S. proposal to give companies the liberty of deciding whether to operate under existing rules or the future framework.

Meanwhile, many developing countries voiced concern in Paris that the whole process is being rushed because of the pressure to avoid disputes over countries’ national digital taxes.

France and the United States agreed a fragile truce last week to set aside a row over France’s digital tax until the end of the year to allow time for the redrafting of international tax rules this year.

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