Long-awaited discussions on the future of global taxation began in Paris this week as tax officials representing more than 130 countries met for the first time.
The Organisation for Economic Cooperation and Development (OECD) confirmed on Friday that the representatives had agreed to start negotiating how and where companies such as Alphabet, Amazon, Apple and Facebook would be taxed.
It comes after national governments, including Britain’s, have threatened to take unilateral action on the matter with plans to take a cut of the revenues generated by the firms within their jurisdictions.
The OECD’s tax policy chief, Pascal Saint-Amans, said in a news conference on Friday that the discussions were “moving fast because what is at stake is a massive trade war”.
He added: “This is what we see on a daily basis with the interaction between France and the US and with the interaction between the US and the countries that have said they would launch digital services taxes.”
The European Commission has aggressively pursued tech firms that it claims are failing to pay their fair share of tax in the countries in which they operate. In 2016, Ireland was ordered to claim $13bn in back taxes from Apple after breaking EU state aid laws.
But, faced by opposition from Ireland and other member states, the EU has so far failed to agree on a bloc-wide taxation regime for digital companies that generate revenues in a nation without having a physical presence there.
France had threatened to impose a revenue tax on tech firms last year, but dropped the plans following discussions between Emmanuel Macron and Donald Trump at Davos earlier this month.
The British government has vowed to press ahead with plans to introduce a revenue tax on tech firms after France dropped its proposals. Speaking earlier this month, Sajid Javid said: “It is a proportionate tax, and a tax that is deliberately designed as a temporary tax. It will fall away when there is an international agreement.”
Responding to Javid’s remarks, the US treasury secretary Steve Munchin threatened to retaliate: “If people want to just arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies.” “I’m sure the president and Boris [Johnson]will be speaking on it as well,” he added.