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Hey, G20. Please knock it off with the whole tax loophole thing - we're good guys, really

Digital Economy Group asks OECD to leave tax laws alone

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A tech lobbying group has written to the OECD to try and stop the G20's efforts to close loopholes that let international firms legally avoid some of their taxes.

The Digital Economy Group's letter was published by the think-tank along with other documents both for and against reforms to international tax laws, ahead of a progress update on a potential action plan for change due this Thursday.

The group, which represents leading US and non-US software, content, social media and ecommerce firms, said that it was unfair of authorities to be singling out tech companies for its tax ire.

"The internet is available to any enterprise that wishes to access it. Accordingly, no enterprise that secures a cost advantage by virtue of adopting internet-based efficiencies can exclude competitors from doing the same," it said.

The informal coalition also denied that digital firms acted any differently than other firms when it came to legal or tax matters. The DEG also said that VAT and other indirect taxes were the correct taxes to talk about when governments were focused on the point of consumption, not corporate taxes.

Tech firms have been singled out in a number of embarrassing tax scandals in Europe and the US, where details have emerged of legal tax accounting that allows firms to move profits out of countries with higher tax rates, despite the appearance of doing a lot of business there.

Last month, it appeared that Facebook had dodged a hefty corporation tax bill by paying €1.75bn in “admin costs” for its intellectual property to one of its companies in Ireland. Meanwhile, Google financials for 2012 showed it paid £11.2m in corporation tax in Britain, after only reporting a profit of £36.8m on turnover of £506m.

MPs from the Public Accounts Committee in Blighty have called this kind of tax arrangement "highly contrived" and labels the practice "aggressive tax avoidance".

On the other side of the pond, Apple has been accused by the US Senate's Permanent Subcommittee on Investigations of being a "tax resident of nowhere" after it emerged that the company had been operating practically tax-free in Ireland since 1980.

But the DEG said that using the internet was just a more efficient way of working and argued against different rules for the "digital economy".

"Enterprises that employ digital communications models operate in all sectors of the global economy," the group argued. "These enterprises constitute the digital economy. Accordingly, any options for addressing the digital economy should apply fairly and equally across all business lines.

"We believe that 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." ®

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