Facebook backed the multilateral proposal proposal from the OECD’s Secretariat for the Steering Group of Inclusive Framework on Thursday. Both Facebook and Google have been weary of countries independently imposing unilateral taxes such as the EU’s as it would create myriad jurisdictions to comply with.
In a statement, Facebook said tax policy should provide certainty for businesses to operate domestically and abroad.
“We continue to support multilateral approaches like that being undertaken at the OECD,” a company spokesman said.
Google also reiterated its support for a movement toward a “new comprehensive, international framework”.
Treasury had raised concerns the measures could be used against Australian resources companies exporting into other markets. Those fears were allayed by specific exclusions for commodities and financial services on Thursday.
KPMG tax partner Grant Wardell Johnson said the exemptions were a “very good thing”.
“Having such a carve-out is particularly important to Australia. Otherwise there is a risk of transferring our revenue base to those that buy our minerals,” he said.
Speaking from an international tax conference in Singapore, Mr Wardell-Johnson said the proposal had a 60 to 80 per cent chance of success.
“If this works it will be one of the most dramatic changes to international taxation in my lifetime,” he said.
“It is important for the global tax system that it succeeds, as the alternative is a proliferation of countries bringing in their own digital services tax laws.”
Mr Wardell-Johnson said the chances of success were bolstered by the risks of failure. “If the EU goes down the path of introducing an EU-wide digital tax and that will be worse for many US companies than this mechanism,” he said.
“The failure to find a solution would also be politically embarrassing for finance ministers. They want it off the agenda.”
He said Treasurer Josh Frydenberg rejected the idea of a flat digital tax because Australia believed the OECD-style solution could work. “It would be embarrassing if it did not.”
Mr Frydenberg said a multilateral, consensus-based solution to the tax challenges arising from digitalisation was key to ensuring the integrity of the tax system. He said he would bring the proposal back to the G20 in 2020.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra
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