G20 Leaders Demand Digital Tax By End of 2020, US Minister Maintains Current Proposal is Discriminatory
Lucas Cacioli Feb 25, 2020 10:00
The Group of 20 met in Riyadh last weekend with senior officials expressing alarm at the delay in plans to implement new digital taxes on American technology companies. The New York Times reported on Feb 22, that after two years of economic fallout from a trade war, leaders of the G20 feel that if a deal is not made in the coming months, European countries will begin collecting levies on the US tech giants, which could lead to US retaliation.
The Group of 20 met in Riyadh last weekend with senior officials expressing alarm at the delay in plans to implement new digital taxes on American technology companies.
The New York Times reported on Feb. 22, that after two years of economic fallout from a trade war, leaders of the G20 feel that if a deal is not made in the coming months, European countries will begin collecting levies on the US tech giants, which could lead to US retaliation.
G20 Summit Osaka 2019 Tax Proposal
In 2019, the G20 leaders agreed that crypto-assets could bring significant benefit to the financial system and the broader economy, according to the “G20 Osaka Leaders’ Declaration” released following the G20 summit in Osaka last June. Within the declaration was also a proposal to implement a digital tax system for the global era.
The proposals would have lead to higher tax bills for some of the world’s most valuable companies, like Google and Facebook, but would also redefine the basic foundations of international tax for a world where economic value is derived from data rather than physical goods.
Britain and France were most vocal about the tax proposals last year, advocating a focus on making it more difficult for large technology companies to shift profits to low tax jurisdictions, and to introduce a minimum corporate tax.
At the 2019 G20 Summit, France’s finance minister, Bruno Le Maire said, “We have a new economic model based on digital activity that is based on massive sales and exchanges and data usage. For now, there is no fair tax for this new economic model.”
Taxation Tensions
Last Sunday in Riyadh, Bruno Le Maire addressed reporters at the sidelines of the G20 meeting. He said, “There is a consensus to build a solution by the end of 2020. Let's be clear – either we have at the end of 2020 an international solution… clearly in the interest of all countries and digital companies, or there is no solution and … then it will be up to the national taxes to enter into force.”
The G20 leaders have also encouraged further work by the Organization for Economic Cooperation and Development (OECD) on the global rules to tax digital giants like Google, Amazon, and Facebook. The OECD wants to agree on the technical details of such a tax by July.
Despite companies like Amazon making global headlines for not paying taxes, United States Treasury Secretary, Steven Mnuchin has expressed that he is hoping for a resolution on the digital tax by the end of 2020. He did note that Washington would strike back if France or others were to try and enforce such a tax without their consensus. He told Reuters, “We’ve been very consistent in saying we think the digital services tax is discriminatory in nature against digital companies, and specifically a handful of US companies.”
An agreement is expected to be reached by the year’s end that will define the global ruleset and hopefully avoid the resulting fragmentation of localized digital tax regimes.
Image via G20 OrgImage source: Shutterstock
