OECD Proposes Digital Tax on Companies with 20 Billion Euro Revenue and 10% Profit Margin

[Photo by Reuters-Yonhap News]

[Asia Economy Reporter Park Byung-hee] The Organisation for Economic Co-operation and Development (OECD) has proposed digital tax criteria of annual sales of 20 billion euros and a profit margin of 10%.

The Nihon Keizai Shimbun (Nikkei) reported on the 29th that the OECD presented a draft taxation rule to about 140 countries and regions that are creating digital taxation regulations.

The digital tax is a tax imposed on global IT companies such as Google and Facebook that provide services based on the internet. Companies like Google have avoided taxes by claiming they do not have a legal entity subject to taxation despite generating huge revenues based on the internet. As a result, discussions on introducing a digital tax to impose taxes in the countries where IT companies generate sales have been actively underway.

At the G7 finance ministers' meeting held in London, UK, on the 4th and 5th, the G7 finance ministers agreed on a plan to tax at least 20% of the portion of profit exceeding a 10% profit margin in the country where the sales occur. At that time, only the profit margin criterion was presented, raising controversy that companies like Amazon, which do not reach a 10% operating profit margin, could be excluded from taxation. With the OECD newly presenting the sales criteria as well, such controversies are expected to decrease.

The OECD set the criteria of 20 billion euros (approximately 27 trillion won) in sales and a 10% profit margin to narrow down the taxable companies to about 100, allowing the digital tax to be broadly imposed in countries and regions where consumers are located.

Related countries plan to hold an online meeting for two days starting on the 30th of this month to organize a working-level agreement document. The goal is to reach an agreement at the G20 finance ministers and central bank governors meeting to be held in Italy next month.

The Nihon Keizai Shimbun predicted that there is a possibility of another tug-of-war as some countries raise objections, such as demanding the exclusion of financial businesses, regarding the digital taxation rules targeting major IT companies like Google, Apple, Facebook, and Amazon.

This content was produced with the assistance of AI translation services.