The efforts of the OECD to get almost 140 governments on board with a new global framework for taxation have mostly prevented a patchwork of national measures. However, some European countries aren’t willing to wait, which is why tech giants like Amazon, Apple, and Google have now increased their developer and advertising fees, despite previously showing their support for new international tax rules.
Earlier this year, several countries in Europe — including the UK, France, Austria, Italy, Poland, and Turkey — revealed a new digital services tax that would be imposed on tech giants and advertisers later this year. This is partly the result of very slow progress in the OECD’s efforts to get 137 countries to reach an agreement on new international tax rules, which would prevent any tax avoidance practiced by multinational corporations.
The OECD did manage to convince countries like Spain, Belgium, France and Germany to wait until the end of this year in the spirit of better alignment with a preliminary draft of upcoming international tax rules and lowering compliance costs for the companies affected by these changes. However, other countries have decided to go ahead with their own digital services tax, starting with the UK in November.
The tax rate varies by country, ranging from 1.5% in Poland to 7.5% in Turkey. Something worth noting is that it will only apply to companies with an annual revenue of more than $750 million per year, which is why Apple, Amazon, and Google have announced a sucker punch for developers, third-party sellers, and advertising clients in those countries — higher fees.
All three tech giants note that this is the result of new tax rules, which would be completely normal in most circumstances. Currency fluctuations and ever-changing tax regimes often reflect in the price of the final products and services offered by these companies. However, the idea behind the new digital services tax was to put an end to tax havens and tax avoidance. Instead, it looks like the brunt of the measures will be felt by the little guys — developers and advertising clients.
Google and Amazon explained in separate statements that they encourage all countries to focus on a clear set of international tax rules as opposed to implementing their own digital services tax. In the meantime, they’ll be passing the added costs to third-parties until the OECD can come up with “rules that would be consistent across countries and clearer and fairer for businesses.”