Norway Advocates Global Digital Tax Solution

by Ulrika Lomas, Tax-News.com, Brussels

22 January 2018

The Norwegian Government is considering possibilities for the taxation of multinational companies' "value creation" in Norway, including in the area of value-added tax, although it said that it would prefer a multilateral agreement on any new measure.

In a letter to the parliamentary finance committee dated January 18, Finance Minister Siv Jensen wrote that the proposals under consideration are aimed at "global technology companies" with high volumes of sales in the Norwegian market, but with "little or no physical presence there."

The letter notes that governments are currently limited in their ability to tax the profits of companies that provide goods and services via digital platforms, as these companies typically lack a physical presence in the jurisdictions in which they generate sales.

"This means that if a foreign company sells goods and services to consumers in Norway and it happens without the company being physically present here, we will normally have limited tax on income from such sales," Jensen wrote.

She went on to note that it is seen as unfair that companies can earn "huge revenues" that are subject to little or no tax.

Existing tax rules in some jurisdictions also encourage profit shifting, Jensen stated. "For example, there are many cases of technology and other valuable intangible assets being placed in the low-tax country or in countries that have particularly favorable tax rules for income from such assets."

"Restricting the opportunities for aggressive tax planning through such mobile tax bases has therefore been central to international tax cooperation in recent years, and one expects that this work will have positive effects," she added.

The finance minister said digital companies' sales in foreign markets should also be subject to value-added tax there under the destination principle.

"The destination principle means that it is the country where consumption takes place which has the right to tax," she observed, adding later that sales tax "is an appropriate solution."

Jensen also mentions other options under consideration at European Union level to ensure adequate taxation in the digital economy, including the proposed "equalization levy" on companies' revenues, and withholding taxes on certain digital transactions.

However, Jensen made clear in the letter that Norway supports a multilateral solution to the problem, to avoid taxpayer uncertainty and unintended consequences.

"I think this is the key to effectively taxing multinational companies, while reducing the potential for unfortunate adjustments and cases of double taxation. Common solutions will provide more predictability for taxpayers," she concluded.

TAGS: Finance | tax | value added tax (VAT) | sales tax | Norway | internet | tax planning | transfer pricing | withholding tax | services | Europe | BEPS

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