G20 leaders call on unity in taxing tech giants

New OECD reform could boost national tax revenues by a total of $100bn a year

Photo: Reuters German Finance Minister Olaf Scholz

Finance ministers and central bank governors from G20 nations are gathering in the Saudi capital Riyadh Saturday for a two-day meeting, aimed at discussing the global economy and the risks from the coronavirus epidemic. Aside from an action plan to shield the world economy from the impact of the outbreak, financial leaders from the world's top 20 economies are also expected to discuss ways to achieve a fairer global taxation system for the digital era.

Global rules are being developed by the Organisation for Economic Cooperation and Development (OECD) to make digital companies pay tax where they do business, rather than where they register subsidiaries. The OECD says this could boost national tax revenues by a total of $100bn a year. Additionally, the OECD wants to set a minimum effective level at which such companies would be taxed and seeks agreement by the start of July, with an endorsement by the G20 by the end of the year. 

But the OECD efforts were stalled late last year by last-minute changes demanded by Washington, which many G20 officials view as reluctant to deal with a potentially politically tricky matter before the presidential election.

In that regard, G20 officials insisted that leading world economies must show unity in dealing with aggressive “tax optimisation” by global digital giants like Google, Amazon and Facebook.

“A coordinated answer is not the better way forward, but, given the alternatives, the only way forward,” OECD head Angel Gurria told a tax seminar on the sidelines of a meeting of G20 finance ministers and central bankers.

The call for unity appeared mainly directed at the United States, home to the biggest tech companies, in an attempt to head off any stalling on the rules until after the American presidential election in November.

“There is no time to wait for elections,” German Finance Minister Olaf Scholz told the seminar.

“This needs leadership in certain countries,” Scholz said looking directly at US Treasury Secretary Steven Mnuchin, sitting next to him at the seminar.

For his part, Mnuchin said OECD countries were close to an agreement on the minimum tax level, which he said would also go a long way to resolving the issue of where tax is paid.

“I think we all want to get this done by the end of the year, and that’s the objective,” Mnuchin told the seminar.

Several European countries, including France, Spain, Austria, Italy, Britain and Hungary either already has a plan for a digital tax or are working on one, creating the risk of a highly fragmented global system.

“You cannot have in a global economy different national tax systems that conflict with each other,” Mnuchin said.

Similar articles

  • Bundesbank President Weidmann wants a limited role initially for digital euro

    Bundesbank President Weidmann wants a limited role initially for digital euro

    A digital euro, currently under design by the European Central Bank, should have a limited role initially as it could disrupt the bank sector and overly extend the role of central banking, Bundesbank President Jens Weidmann said on Tuesday, cited by Reuters. "A gradual approach might make sense given the risks involved – that means a digital euro with a specific set of features and the option to add further functionalities later," Weidmann, who is member of the European Central Bank (ECB) Governing Council, told a conference.

    52
  • European banks book €20bn in tax heavens

    European banks book €20bn in tax heavens

    The European banks are very far from halting operations with tax heavens to book their profits. This practice was little changed since 2014 even after country by country disclosures are becoming mandatory, the EU Tax Observatory noted in an official report.

    61
  • PayPall allows crypto deals for UK clients

    PayPall allows crypto deals for UK clients

    The payments platform PayPal announced it would allow its clients based in UK to buy and sell cryptocurrencies. Until now PayPal only allowed its US customers to trade in crypto asstets. The company sees its UK expansion in digital money trading as a milestone in its cryptocurrency services, Reuters reported.

    75