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2020: Dawn of Global Tax

The OECD aims to have agreement among its 36 member states on the unified approach by 2020.

DESPARDES — Companies are studying a proposal by the Organization for Economic Cooperation and Development (OECD) for a new global tax system that would mark a departure from current international tax rules.

However, some corporate tax chiefs say their efforts to assess its potential implications are being complicated by what they describe as a lack of critical details, the Wall Street Journal reported.

The OECD, which is running the initiative, aims to have agreement among its 36 member states on the global tax approach by 2020.

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Dubbed the “unified approach,” the rules would apply to companies with annual revenues of more than $830 million in consumer-facing industries, a broad term that includes technology companies — which have been in the spotlight for their tax practices—and other firms selling services and goods to consumers worldwide.

A consumer-facing business has been defined in the proposal as any business that markets or supplies consumer products or services.

The organization’s proposal follows moves by various countries to implement unilateral digital-services tax regimes to increase receipts from tech giants such as Facebook Inc., Amazon.com Inc. and Alphabet Inc.’s Google.

In Asia, China and India with a huge global revenue stream: China in Telecom, digital selling; and India in e-commerce and IT-related services are expected to feel the heat in short-term, said one Wall Street professional of South Asia origin.

Some companies also told WSJ they are worried about how disputes between countries over the application of the rules would be resolved.

Citing a recent Ernst & Young survey, the WSJ said seventy-nine percent of tax executives at global companies described the current tax environment as uncertain.

The OECD was scheduled to meet Thursday and Friday in Paris to discuss the proposal.

Once implemented by 2020, the unified approach proposal would set a standard tax rate for a company’s global operations and allow individual governments to tax profits above that based on sales accounted for by each country.