ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Economy

Global digital tax plan targets companies with $23bn-plus in sales

Pressure builds on Google, Amazon and other tech giants to pay up

Many countries around the world are stepping up efforts to tax Big Tech, including Google, Apple, Facebook and Amazon.com. (Photos by Shinya Sawai, Kosaku Mimura and Wataru Ito)

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.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more