G-20 agrees to wrap up digital tax rules on tech companies like Facebook by 2020

  • G-20 finance ministers agreed to compile rules on digital taxes for tech companies like Facebook, Google, and Amazon by 2020.
  • The new rules would mean higher tax burdens for large multinational companies but would also make it harder for countries such as Ireland to attract foreign direct investment with the promise of ultra-low corporate tax rates.

Group of 20 finance ministers agreed on Sunday to compile common rules to close loopholes used by global tech giants such as Facebook to reduce their corporate taxes, a final communique issued by the bloc showed on Sunday.

Facebook, Google, Amazon, and other large technology companies face criticism for reducing their tax bills by booking profits in low-tax countries regardless of the location of the end customer. Such practices are seen by many as unfair.

The new rules would mean higher tax burdens for large multinational companies but would also make it harder for countries such as Ireland to attract foreign direct investment with the promise of ultra-low corporate tax rates.

“At the moment we have two pillars and I feel we need both pillars at the same time for this to work,” Japanese Finance Minister Taro Aso, who chaired the G-20 meetings, told reporters.

“The proposals are still a little vague, but they are gradually taking shape.”

Britain and France have been among the most vocal proponents of proposals to make it more difficult to shift profits to low-tax jurisdictions, with a minimum corporate tax also in the mix.

This has put the two countries at loggerheads with the United States, which has expressed concern that U.S. internet companies are being unfairly targeted in a broad push to update the global corporate tax code.

Big internet companies say they follow tax rules, but they pay little tax in Europe, typically by channeling sales via countries such as Ireland and Luxembourg, which have light-touch tax regimes…

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