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Local fixes won’t work on taxing the likes of Apple and Facebook says IMF

The International Monetary Fund (IMF) today urged governments around the world to work towards global standards around the thorny issue of taxing profits made by international digital firms like Facebook and Google.

High profits enjoyed by Amazon, Apple and other big firms make for an “attractive tax base” for governments, but unilateral moves can only be “short-term solutions”, the IMF argued In a chapter from its semi-annual fiscal monitor, published today.

The influential body said the opprobrium directed at big digital companies reflects “fundamental problems with existing international tax arrangements” which have not adapted to the complex cross-border structures adopted by multinational firms.

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Governments have made some supranational efforts to tackle the tax problems of an increasingly global economy, such as the Organisation for Economic Cooperation and Developments base erosion and profit shifting (Beps) project.

However, those efforts have so far struggled to make a meaningful impact on big companies, which has caused a backlash in countries around the world – including a “diverted profits” tax in the UK.

“The sheer scale of digital activities has raised concerns about the fairness of the current allocation of international taxing rights,” wrote Vitor Gaspar and Genevieve Verdier from the IMFs fiscal affairs department in a blog post accompanying the report. “As the whole economy becomes digital, global solutions are required.”

The report also said governments should examine ways to digitalise tax collection, saying adoption of digital tools at the border could boost tax collection worldwide by as much as two per cent of GDP.

The boost could come by making it harder for people to move money across borders without tax authorities knowing, reducing the massive amount of wealth – worth as much as 10 per cent of world GDP – hidden illegally offshore.

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