Daily Management Review

G20 Should Make Taxing Giant Digital Firms This Year’s Top Priority, Demands The EU


G20 Should Make Taxing Giant Digital Firms This Year’s Top Priority, Demands The EU
The financial leaders of the G20 countries should strive to reach an agreement by this year globally on the method of taxing the giant digital companies such as Google, Amazon and Facebook, Europe has demanded, claimed reports quoting information derived from a document.
The current developments made by the Organisation for Economic Cooperation and Development (OECD) on a globally acceptable and applicable tax rule for digital companies will be one of the major issues of discussion among the finance ministers and central bank governors of the top 20 largest economies (G20) of the world when they meet on February 22-23 in Riyadh.
“We need to give the highest priority to finding global solutions to address the taxation of the digital economy and the remaining Base Erosion and Profit Shifting issues,” reported Reuters citing information from a document that outlines the position of the member states of the European Union who are also members of the G20. The list of countries also includes the United Kingdom which eventually exited the EU last month.   
“We look forward to ambitious, fair, effective, non-discriminatory and workable global solutions and will redouble our efforts towards a consensus-based solution to deliver this global goal in 2020,” the document said, claimed the Reuters report.
It has been a long standing stance of the European Union that the large digital companies that make very large amounts of profits should be made to pay taxes form where they sell their services and generate revenues instead of paying taxes in the so called tax haven where most of such large digital companies have their European headquarters. This strategy of intentional choosing of a tax haven is referred to as “aggressive tax optimization”.
For example, the United States based search engine giant Google which has an average annual profit of more than $160 billion, has been paying taxes in Europe at single digit rates for the profits it makes form its European business by the virtue of being headquartered in low tax countries. The effective tax rate for Google has been about a quarter of the average tax rate in its overseas markets and this has for long made EU politicians angry because the bloc is seeking more money to fight climate change and reduce wealth differences across the 27-nation bloc.
Despite the best efforts of the EU to develop a globally acceptable and agreeable tax regime for these huge digital companies making billions of dollars in profits, nothing has emerged as yet which has prompted some European countries such as France to announce and implement new taxes for such companies last year. However the US has threatened to impose retaliatory tariffs.
Other countries that have already introduced their own digital taxes or plan to do so include Italy, Britain and Spain.
Reports said that the Facebook CEO Mark Zuckerberg cionce3de that any global tax reforms would mean that the company would have to pay higher taxes in different countries.
The current issue that the OECD is tackling right now is the technicalities about the amount of tax rates for the digital companies and where to tax the companies The organization wants to arrive at an agreement with all players by June this year while reaching a deal on a full array of taxation polices for the companies by the end of the current year.