G20 agrees to push ahead with digital tax...
G20 agrees to wrap up Big Tech tax rules by 2020
* G20 agrees to push ahead with tax reform
* Many feel low tax burden for big tech companies is
unfair
* Washington concerned that U.S. businesses are being
targeted
By Stanley White and Jan Strupczewski Sunday, 9 June 2019
10:42 GMT
TOKYO, June 9 (Reuters) - Group of 20 finance ministers
agreed on Sunday to compile common rules to close loopholes used by global tech
giants such as Facebook to reduce their corporate taxes, a final communique
issued by the bloc showed on Sunday.
Facebook, Google, Amazon and other large technology
companies face criticism for reducing their tax bills by booking profits in
low-tax countries regardless of the location of the end customer. Such
practices are seen by many as unfair.
The new rules would mean higher tax burdens for large
multinational companies but would also make it harder for countries such as
Ireland to attract foreign direct investment with the promise of ultra-low
corporate tax rates.
"At the moment we have two pillars and I feel we
need both pillars at the same time for this to work," Japanese Finance
Minister Taro Aso, who chaired the G20 meetings, told reporters.
"The proposals are still a little vague, but they
are gradually taking shape."
Britain and France have been among the most vocal
proponents of proposals to make it more difficult to shift profits to low-tax
jurisdictions, with a minimum corporate tax also in the mix.
This has put the two countries at loggerheads with the
United States, which has expressed concern that U.S. internet companies are
being unfairly targeted in a broad push to update the global corporate tax
code.
Big internet companies say they follow tax rules, but
they pay little tax in Europe, typically by channelling sales via countries
such as Ireland and Luxembourg, which have light-touch tax regimes.
"We welcome the recent progress on addressing the
tax challenges arising from digitization and endorse the ambitious program that
consists of a two-pillar approach," Sunday's G20 communique said.
"We will redouble our efforts for a consensus-based
solution with a final report by 2020."
The G20's "two pillars" could deliver a double
whammy to some companies.
The first pillar is a plan to divide up the rights to tax
a company where its goods or services are sold, even if it does not have a
physical presence in that country.
If companies are still able to find a way to book profits
in low-tax havens, countries could then apply a global minimum tax rate to be
agreed under the second pillar.
"I see a high degree of willingness to work together
on this issue that few could have anticipated a year ago," said Pierre
Moscovici, the European Union Commissioner for Economic Affairs.
"We truly believe that the tech giants, which are
not only the GAFA, must pay their fair share of tax where they create value and
profits."
GAFA is an acronym commonly used to refer to Google,
Amazon, Facebook and Apple when talking about the influence of large technology
companies.
(Reporting by Stanley White Editing by David Goodman)
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