Nearly 140 governments have agreed to launch a rewrite of decades-old cross-border tax rules for the digital age over the coming months, the Organization for Economic Cooperation and Development (OECD)said on Friday after talks this week in Paris.
The rise of Amazon, Facebook and Google has strained existing rules to breaking point because big tech companies can book profits in low-tax countries like Ireland no matter where their customers are located.
Tax officials from 137 governments agreed at a meeting in Paris to launch negotiations on new rules for where tax should be paid and what share of profit should be taxed when big digital and other consumer-facing businesses do not have a physical presence in the market, the OECD said.
A growing number of countries are preparing national digital taxes in the absence of a major redrafting of current rules, despite threats from Washington to hit them with retaliatory trade tariffs because it sees such levies as discriminatory against big U.S tech groups.
"It's moving fast because what is at stake is a massive trade war," OECD head of tax policy Pascal Saint-Amans told journalists in Paris.
"This is what we see on a daily basis with the interaction between France and the US and with the interaction between the US and the countries that have said they would launch digital services taxes," he added.
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.
A US proposal to let companies choose whether to subject themselves to current rules or the future arrangements received next to no support at the meeting, but countries agreed to not deal with it until the technical work was done, Saint-Amans said.