Business

At Fukuoka meeting, G20 states may ink tax policy for internet giants based on users in each nation

AFP-JIJI, Reuters, Staff Report

G20 countries are planning a new tax policy for digital giants such as Google, based on the business a company does in a country rather than where it is headquartered, the Nikkei business daily reported Thursday.

The international tax rules that would be affected were formed about a century ago.

The basic policy is likely to be signed by finance ministers from the Group of 20 countries when they meet in the city of Fukuoka on June 8-9, ahead of the main G20 meeting in Osaka, the Nikkei said.

The policy, targeting firms such as Google, Apple, Facebook and Amazon, would “allocate revenue to countries that provide large user bases for the world’s digital corporate giants,” the daily said, citing unnamed sources. The countries will seek to reach a final agreement in 2020, but how the policy will work remains to be finalized.

One possibility would be to distribute collected tax revenues to countries based on the number of users a given company has in each country.

That could mean that Facebook, which has centralized its profits and tax payments in Ireland to take advantage of low rates, would see its tax payments redistributed to areas where more of its users live.

Facebook has more than 1.4 billion users around the globe, including 490 million in the Asia-Pacific region, 270 million in Europe and 180 million in North America, the Nikkei said. But a barrage of criticism has prompted the social media giant to review its own tax strategy and move toward calculating income in each country where it operates, according to the report.

Details of how the tax measures under review by the G20 will be collected and distributed, and which companies will be affected, remain to be finalized, with the Organisation for Economic Co-operation and Development (OECD) expected to help iron out the rules.

The issue of how to tax top digital companies has become increasingly fraught.

The United States, United Kingdom and emerging economies have presented proposals for discussion among G20 member states, and all call for the same basic method of taxation and for tax revenue to be distributed to countries where users of digital services reside, the Nikkei said.

But the Paris-based OECD is already trying to forge a new global agreement that would prevent the firms from simply declaring their income in low-tax jurisdictions and depriving other countries of billions in revenue.

In April, French lawmakers passed the first reading of a bill to impose taxes on digital advertising, the sale of personal data and other revenue for any technology company that earns more than €750 million (¥92 billion) worldwide each year.

Austria has proposed similar domestic legislation.

A bid to agree a law at the European Union level was scuttled by low-tax countries such as Ireland, which has wooed big tech firms.

German Finance Minister Olaf Scholz said earlier this month he expected the OECD to agree a minimum level of taxation for digital companies such as Amazon, Google and Facebook by mid-2020. He also said he expected progress by the third quarter of 2019 on introducing a financial transaction tax in at least nine EU countries.

France has proposed to help finance a future budget for the euro zone from taxes on digital companies, but some countries remain wary of the move unless it is backed globally, so as not to put Europe at a disadvantage.