Failure to update international tax rules could incur a loss of “$100 billion”.The OECD expressed its concern on the issue of countries agreeing to continue negotiating till middle of 2021 regarding rewriting “rewrite cross-border tax rules”, whereby adding that in case the attempts “break down” and ignite a trade war, the global economy would be in the risk of losing over “1% of output”.

As many as hundred forty countries have shown their consent of extending talks following the outbreak of COVID-19 pandemic while the U.S. is hesitant prior to its “presidential election” as the hope of arriving at a deal this year have been squashed.

Moreover, there is a growing pressure from the public for the profitable multinational companies to “pay their share under international tax rules” even as the national budget feels the strains of post pandemic effect, revealed the countries in a statement.

In the digital commerce era, the idea is to update the international tax rules especially discouraging big internet giants such as “Google, Facebook and Amazon” from “booking profits in low-tax countries”, like Ireland. The lack of “new international rulebook”, however, is causing more and more governments to come up with their “own digital services taxes” whereby prompting “threats of trade retaliation from the Trump administration”.

In the words of the Secretary General of OECD, Angel Gurria:
“The alternative to finding an agreement would be a trade war … The last thing you want at this time with COVID-19 is to have to deal with further trade tensions”.

This scenario could lead to trade disputes whereby knocking off the world’s GDP by over 1%, as per the estimated “impact assessment” of OECD. On the other hand, new set of rules for “digital taxation” along with the “proposed global minimum tax” the global income tax for corporate could go up by “1.9% to 3.2%”, in other words “about $50 billion to $80 billion” annually. As per Reuters report:
“That could reach $100 billion when including an existing U.S. minimum tax on overseas profits, amounting to 4% of global corporate income tax, the OECD said. Meanwhile, any drag on global growth would be no more than 0.1% in the long term”.

References:
reuters.com