UN draft protocol would expand nations' right to tax tech giants

A May 5 draft protocol circulating within the UN tax process would let countries tax digital companies such as Google, Amazon, and Meta based on where users are located rather than where companies are incorporated. The draft covers online advertising, search, social media platforms, online gaming, cloud computing, and the supply of user data. It also includes online intermediation platforms and digital content services, covering major business models used by large US platforms. The protocol is positioned within the UN Framework Convention on International Tax Cooperation, under terms of reference approved in late 2024. The Intergovernmental Negotiating Committee agreed in early 2025 to develop two early protocols, including this one on cross-border services, with a stated goal to finish the convention and both protocols by 2027.

"A new draft protocol circulating inside the United Nations tax process would let countries tax companies like Google, Amazon and Meta based on where their users are, rather than where the companies are incorporated. The text, dated May 5 and first reported by Bloomberg Tax, is the most concrete attempt yet to convert a decade of debate over digital taxation into binding international law."

"The draft covers a broad list of digital activities. Online advertising, search, social media platforms, online gaming, cloud computing, and the supply of user data all fall within scope. So do online intermediation platforms and digital content services, which between them capture most of the business models the largest US platforms run on."

"The protocol sits inside the UN Framework Convention on International Tax Cooperation, which member states approved a terms-of-reference for in late 2024. The convention's Intergovernmental Negotiating Committee, the INC, agreed in early 2025 to develop two early protocols alongside the main convention: one on cross-border services, which is the document leaked this week, and one on dispute prevention. The INC's stated deadline is to finish the convention and both protocols by 2027."

"Member states will arrive in significantly different positions. India, Brazil and a large bloc of African and Asian countries have pushed hardest for source-based digital taxation, on the grounds that current rules let highly profitable platforms pay tax almost entirely in the countries where they happen to be headquartered. The United States has historically resisted unilateral and multilateral digital taxes alike, and a Trump-administration Treasury is unlikely to soften that position."

Read at TNW | Government-Policy