G7 agrees on tax rules reform targetting tech giants

Ministers also united in a stand against Facebook's Libra, urging for heavy regulation

Photo: EPA

The finance ministers of G7 and central bank governors agreed last week that digital giants such as Facebook, Google, Amazon or Apple should be taxed in every country they make money in, even without being physically present there.

The measure echoes a law passed by the French parliament this month that would tax digital giants for income amassed inside a country even if their headquarters are elsewhere, a move the United States complained discriminated against its firms. Beforehand, Britain, Italy and Spain have also introduced their own taxes on digital companies or plans to do so. 

"This is the first time that G7 members agree in principle on this," French Finance Minister Bruno Le Maire, who hosted the two-day meeting in Chantilly, said.

As part of the two-pronged solution, France also announced that the G7 had agreed on a minimum level of tax to be agreed internationally for big tech companies's activities in order to discourage countries from competing in a “race to the bottom” to attract business from digital multinationals.

"They [members of the G7] reiterated their determination to put an end to the aggressive fiscal competition among states, to put an end to fiscal dumping, to put an end to aggressive optimisation by certain companies that find several ways to avoid tax," Le Maire stressed, with the final statement claiming that ministers "fully supported a two-pillar solution to be adopted by 2020".

Still, further talks are needed in the wider context of the G20 group of top economies for an international agreement which would be overseen by the Organisation for Economic Cooperation and Development (OECD).

In the meantime, the members of the G7 and the Central bank representatives also presented a rare united opposition to Facebook's plan to launch its digital currency Libra, claiming that “stablecoins and other various new products currently being developed, including projects with global and potentially systemic footprint such as Libra, raise serious regulatory and systemic concerns”. Thus, they are not ready to be implemented.

“Today the conditions are not in place for this currency the Libra as proposed by Facebook to go ahead,”France concluded as it made clear that he did not want to see the emergence of Libra as a “sovereign currency.”

 “It cannot go ahead without all legal and regulatory questions being resolved,” German Finance Minister Olaf Scholz said.

“A global stablecoin for retail purposes could provide for faster and cheaper remittances, spur competition for payments and thus lower costs, and support greater financial inclusion,” European Central Bank board member Benoit Coeure, the chairman of the taskforce, added.

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