Suggesting that any leakage of tax revenues flowing from the complex corporate structures of digital groups is merely coincidental, the Digital Economy Group says: “Enterprises that employ digital communications models do not organize their business operations differently as a legal or tax matter.”
Their denial of tax engineering follows a string of tax scandals in Europe and the US in the past two years. In the UK, Google bore the brunt of criticism from Margaret Hodge, who chairs the public accounts committee, after it emerged that Google – which the Guardian understands is a member of the DEG – had been allowed to pay £3.4 million in tax to HMRC in 2017 despite UK revenues of £3.2 billion.
Above all the DEG letter insists international tax rules should not be altered specifically to target digital companies, a move it says would be penalizing their operational innovation. “We believe that [digital] enterprises operating long-standing business models, subject to established international tax rules, should not become subject to altered rules on the basis that they have adopted more efficient means of operation.”
Sol Picciotto, a Lancaster University law professor, said the DEG’s stance was hard to sustain. “I don’t think you could fairly say that they don’t organise their business differently [to secure tax advantages] … I don’t think it’s true … It’s rubbish.”
The DEG paper and other submissions to the OECD have been published in advance of a progress update from the thinktank on Thursday. The update comes amid concern the political will for tackling tax avoidance by online and hi-tech groups is fading. Reform had been a hot topic at the World Economic Forum in Davos this time last year but, as business and political leaders reconvene this week, it is not expected to feature prominently.
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