G20 officials call for unity to tax tech giants

Published: February 23, 2020
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A Reuters illustrative image

A Reuters illustrative image

RIYADH: Leading world economies must show unity in dealing with aggressive “tax optimisation” by global digital giants like Google, Amazon and Facebook, G20 officials said on Saturday.

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 $100 billion a year.

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 US presidential election in November.

“There is no time to wait for elections,” German Finance Minister Olaf Scholz told a tax seminar on the sidelines of a meeting of G20 finance ministers and central bankers.

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

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. “A coordinated answer is not the better way forward, but, given the alternatives, the only way forward,” OECD head Angel Gurria told the seminar.

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.

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.

Mnuchin sought to reassure G20 delegates that a US proposal to add a “safe harbour” regime to the tax reform effort – which has drawn criticism from France and other countries – would not let companies simply opt out of paying taxes.

“It’s not an optional tax,” he said. “You pay the safe harbour as opposed to paying something else. People may pay a little bit more in a safe harbour knowing they have tax certainty.”

US officials say their proposal would allow a multinational enterprise to elect to pay more foreign tax in exchange for enhanced tax dispute resolution benefits and administrative relief. But many questions remain.

More clarity needed

French Finance Minster Bruno Le Maire told reporters it remained unclear exactly what the US proposal would entail. “We’re still in the process of assessing what it really means,” he said, adding, “It’s not a non-starter for the French government. It’s fair and useful to give all the attention to this new proposal.”

European Union Economy Commissioner Paolo Gentiloni told Reuters there was still hard work ahead. “It’s good that there is a commitment to find a solution, but … it’s not there,” he said, adding that he would meet with Mnuchin for bilateral talks later Saturday.  

Published in The Express Tribune, February 23rd, 2020.

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