G20 Countries Plan Tax for Digital Giants

G20 Countries Plan Tax for Digital Giants

G20 countries are looking to implement a tax on digital tech companies such as Google, Apple, Facebook and Amazon based on where they make their money.

According to the Japanese press, this proposal will be signed when the G20’s finance ministers meet next month on June 8-9 in Fukuoka, Japan, prior to the organization’s annual meeting to happen in Osaka.

The Nikkei business daily reported that the proposal to be discussed and signed will “"allocate revenue to countries that provide large user bases for the world's digital corporate giants” and will hopefully be implemented in 2020.

However, details on how this policy will be carried out have not been revealed, yet plenty of help is expected from the OECD, organization that has been very active in developing a global tax on digital companies.

For instance, AFP suggests, “One possibility would be to distribute collected tax revenues to countries based on the number of users a given company has in each country.”

If this were to be enforced, then “Facebook, which has centralised its profits and tax payments in Ireland to take advantage of low rates, would see its tax payments redistributed to areas where more of its users live.”

Nikkei business daily reports that Facebook, which currently “has more than 1.4 billion users around the globe, including 490 million in the Asia-Pacific region, 270 million in Europe and 180 million in North America,” is looking to modify is tax policy following “a barrage of criticism” and start “calculating income in each country where it operates.”

Different Ideas & Policies on Digital Taxation

Different Ideas & Policies on Digital Taxation

Overall, ideas and policies pertaining to the taxation of digital tech companies vary greatly.

One has been a simple levy on local turnover with France, Spain and the UK leading the way in Europe.

As explained by Australian InTheBlack magazine’s David Walker, “The UK plans a 2 per cent turnover tax from 2020, Spain is enacting a 3 per cent turnover tax for companies with revenues of more than €700 million globally and at least €3 million in Spain,” and “France would like to see all European countries move to a 3 per cent turnover tax.”

Austria has a similar tax to that in France in the works, but at the higher rate of 5 per cent.

On the other hand, the Czech Republic looked at digital taxation from a different perspective, one that Bloomberg Opinion’s Leonid Bershidsky believes is the ideal way to tax the GAFA companies.

Bershidsky writes: “The Czech finance ministry plans to have a digital tax proposal ready by the end of [May]. What’s known about it so far is different from other nations’ plans in two important ways: the high proposed tax rate of 7 percent, and the targeting of advertising and personal data sales as the primary base.  The country also plans to tax sharing economy platforms.”

Additionally, says Bershidsky, “At first glance, the idea behind the Czech digital tax is similar to the French one, but the French proposal names platforms that put users in touch with each other for a fee as the primary target, while the Czech one prioritizes targeted ads,” which in turn “puts the emphasis in the right place.”

Still, a lot of work is yet to be done with the OECD is analyzing all possible angles.

For example, Walker writes that “the OECD has acknowledged that it may end up creating new taxing rights where a business activity creates business value “through participation in the user or market jurisdiction”, beyond what’s currently used to tax profits.”

The organization is also “exploring ideas such as “significant economic presence” that go beyond the current “permanent establishment” threshold for tax.”

What are your thoughts on all of these issues revolving around digital taxation and the large American tech multinationals? What is the fairest and most feasible solution?

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