France has failed to secure backing for tough international tax rules specifically targeting digital companies, such as Google and Amazon, after opposition from the US forced the watering-down of proposals that will be presented at this week's G20 summit.

Senior officials in Washington have made it known they will not stand for rule changes that narrowly target the activities of some of the nation's fastest-growing multinationals, according to sources with knowledge of the situation.

The Organisation for Economic Co-operation and Development has been told to draw up an action plan for tax reform at the gathering of G20 finance ministers this Friday, but the US and French governments have been at loggerheads over the proposals.

Tweaking not change
While the Americans concede the rules need to be updated, they are understood to be pushing for moderate change. They are believed to want tweaks to the wording of international tax treaties rather than the creation of wholly new passages dedicated to spelling out how the digital economy should be taxed.

This has put the US at odds with several G20 nations, particularly France, which in January published radical proposals for new concepts in international tax treaties designed to counter some of the avoidance measures deployed by internet firms. Officials at the G20 governments have been working closely with the OECD.

Bilateral treaties
Despite opposition from the US, the French position – which also includes a proposal to link tax to the collection of personal data – continues to be championed by French finance minister Pierre Moscovici. The OECD plan has been billed as the biggest opportunity to overhaul international tax rules, closing loopholes increasingly exploited by multinational corporations in the decades since a framework for bilateral tax treaties was first established after the first World War.

Among the areas expected to take longest to produce results is in which jurisdiction a multinational group should pay tax on its business activity. Many internet firms’ tax structures, such as those of Google and Amazon, exploit loopholes in this area.

The OECD has made clear it regards aggressive tax engineering by internet multinationals to be among six "key pressure areas" it will address. –(Guardian)