Japan Press Weekly

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2019 October 9 - 15 TOP3 [ECONOMY]

OECD seeks to tighten taxation rules on IT giants

The outlines of an OECD draft for new “digital tax” rules on IT giants came out on October 7.

According to the draft, new tax rules will be applied not only to global IT businesses but also to multinational corporations with certain levels of sales volume and operating income to sales ratio.

Gigantic major corporations in the IT industry, such as Google and Facebook, have avoided paying corporate taxes in countries where they earn a huge amount of online ad revenues on the grounds that they have no physical hub or presence there. Under the new OECD-drafted taxation system, IT giants like GAFA will be forced to share tax burdens in proportion to the size of sales which they procured in each country. This is a big step to prevent internet companies and other major multinationals from dodging their fair share of taxes.

The Japanese Communist Party in the Diet has repeatedly brought up the issue of taxing the digital economy and requested the government to take necessary steps, including establishing the nation’s own taxation policy.

At a House of Representatives Financial Affairs Committee meeting on February 23, 2018, JCP lawmaker Miyamoto Toru revealed Facebook’s tactics used to evade taxes, and pointed out, “With the use of these tactics, the company has been escaping from paying corporate taxes in Japan.” He demanded that the government begin discussions on revisions of relevant treaties and domestic laws for the purpose of levying taxes on the profits of foreign digital businesses.

Finance Minister Aso Taro just said it is necessary for the government to continue working on this matter.

Past related articles:
> JCP Daimon: Proper international taxation on GAFA needed [April 10, 2019]
> Corporate taxes paid by Amazon Japan were 1/30 of that of Japan's major retailers [May 14, 2018]
> Apple avoids paying 1.2 trillion yen in tax in Japan [December 27, 2017]