OECD Must Delay Tax Work For Virus, German Biz Org Says

The Organization for Economic Cooperation and Development should delay its efforts to change corporate tax rules because of the economic turmoil caused by the novel coronavirus pandemic, a German business group has said.

In light of the global pandemic, the OECD should postpone its work to design rules for the digital economy until businesses can better cope with the strain that work places on their resources, the BDI group said in a statement Thursday.

"The discussion and implementation of the OECD proposals create considerable administrative overhead for companies," BDI said. "This additional load is not reasonable in the current situation."

The German group's comments followed a similar plea from an American business group. The U.S. Council for International Business said this week that the OECD should delay its work on changing the tax system for at least six months.

The BDI statement didn't give an alternative timeline. The group didn't immediately respond to a request for comment.

Even as the coronavirus has put a halt to much of public life and spawned travel restrictions across much of the globe, the OECD has continued to insist that it wants an international deal on changing global tax rules by the end of this year. 

Pascal Saint-Amans, who leads the OECD's work to find a global agreement, said in an email to Law360 that the group was still following the mandate of the Group of 20, made up of the world's leading economies, to find a deal by the end of the year. He said the OECD took note of BDI's letter and recognized "that companies are very concerned with struggling with the crisis."

"We also note that a number of businesses (tech and nontech) seem to have different views on this issue," Saint-Amans said.

The OECD's work is focused on two pillars, the first of which involves redesigning corporate tax rules so that countries with a large number of digital customers can still levy corporate tax even if companies lack a taxable physical presence. The second pillar involves setting a global minimum corporate tax.

The negotiations on both pillars were fraught even before the coronavirus crisis disrupted the global economy and caused travel restrictions. It remains unclear whether the U.S. would actually enact a first pillar or make it optional for American companies. Some smaller countries that host headquarters of multinational companies resist the idea of a global minimum corporate tax.

One reason the OECD wants to get a deal fast is that failure to do so could cause trade wars as countries retaliate against others that have imposed their own digital taxes. The U.S. and France reached a deal in January to avert tariffs on French products. In return, France said it would suspend collection of its digital tax until the end of the year.

The French finance ministry told Law360 on Thursday that the delayed collection plan remains in place, even against the backdrop of increased government spending to combat the pandemic crisis.

--Editing by Neil Cohen.

For a reprint of this article, please contact reprints@law360.com.