TOKYO -- The Organization for Economic Cooperation and Development aims to impose digital taxes on roughly 100 companies with at least 20 billion euros ($23.9 billion) in revenue and a 10% profit margin, according to a proposal presented to roughly 140 countries and regions.
Negotiating countries hope to iron out the details of the international digital taxation scheme at a two-day online meeting starting Wednesday, with an agreement to be signed at the Group of 20 finance ministers and central bankers meeting in Italy in July.
The push for a global digital tax is largely a response to the rise of Big Tech companies like Google, Amazon.com, Facebook and Apple.
Companies are generally taxed where their factories, stores and other physical operations are located. But tech companies provide their services digitally throughout the world, often without a large-scale physical presence. Taxing them even in jurisdictions where they reap large amounts of revenue has been a challenge.
G-7 finance ministers in early June agreed to back basic earnings thresholds for digital taxes, targeting roughly 100 multinational companies. Their plan would impose a minimum 20% tax rate on all profits exceeding a 10% margin.
For example, a company with a profit margin of 15% would pay a 20% tax on all profits past the 10% mark, which would then be divided among countries and regions where it earns its revenue. The exact allocation of such taxes has yet to be ironed out, but will likely depend on the number of users and amount of earnings in each market.
Amazon logged a profit margin under 10% in its latest financial results, putting it below the proposed threshold. Countries look to tax Amazon's highly profitable cloud business instead as an exception.
Only a handful of Japanese companies are expected to be affected by the OECD proposal.
Some countries are calling for the bloc to exclude certain business sectors, like finance and commodities, from the new tax rule. Negotiations over details are expected to continue.
In addition to the digital tax, OECD members are also discussing a global minimum corporate tax. Some members want to back a minimum rate of 15%, like the G-7 did in June. But others, largely low-tax and emerging economies, oppose the idea.