G20 finance ministers agreed to develop common rules for closing loopholes that global technology corporations, such as Facebook, use to reduce their corporate taxes. This is stated in the final communiqué, published by the block on Sunday.
Facebook, Google, Amazon and other large technology companies are criticized for cutting their taxes, registering profits in low-tax countries, regardless of the location of the end customer. Many consider this practice unfair.
The new rules will mean a higher tax burden for large multinational companies, moreover, countries such as Ireland and Luxembourg will find it harder to attract foreign direct investment, promising ultra-low corporate tax rates.
“We sincerely believe that technology giants, which are not only GAFA, should pay their fair share of tax where they create value and profits,” said Pierre Moscovici, European Union Commissioner for Economic Affairs.
The United Kingdom and France were among the most active supporters of changes in tax legislation that would make it difficult to transfer profits to low tax jurisdictions or with minimal corporate tax.
This led to a conflict between these countries and the United States, which expressed concern that US Internet companies were unfairly targeted to a widespread update of the global corporate tax code.
Large Internet companies say they follow tax rules, but in Europe, they pay little tax, usually directing sales through countries such as Ireland and Luxembourg, which have simplified tax regimes.
“We welcome the recent progress in resolving tax issues related to digitization and endorse an ambitious program consisting of a two-tier approach,” says the G20 communiqué. “We will redouble our efforts to reach a consensus solution with a final report by 2020.”
Earlier it was reported that the French government announced a plan for taxing the income of Internet companies, in particular, Google, Amazon and Facebook.