A plan circulated by the Israel Tax Authority to enforce taxes on Internet activities has some analysts worried that the enforcement could send big players in the high-tech field packing.
The plan, which is based on a draft of OECD recommendations for tackling multi-national corporations’ aggressive tax planning, would subject Internet-based transactions of foreign-based companies to Income Tax and Value Added Tax (though its application would depend on where the company is based).
In 2014, the OECD took on the problem of Base Erosion and Profit Shifting (BEPS), which “refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.”
The idea was to create a coordinated action plan among countries to ensure that they all filled in the loopholes. Letting countries act alone would simply give companies an incentive to shift to an equally attractive location that hadn’t put more stringent tax laws in place.