European leaders are pushing for the global rules of taxing of digital giants a top priority of the world’s financial leaders. Some of these digital giants include the companies often referred to as GAFA: Google (Alphabet), Apple, Facebook, and Amazon. This upcoming weekend from February 22nd to the 23rd, many financial ministers alongside central bank governors belonging to the 20 biggest world economies (G20) are expected to come together in Riyadh, Saudi Arabia in order to discuss the issues of the OCED tax rules. European Union members on the G20 and Britain have released a statement claiming that both the issue surrounding taxation within the digital economy and issues involving base erosion and profit shifting need to be addressed. Leaders attending this meeting are hoping to come to an agreement that is both workable and non-discriminatory so that all leaders will be on board to deliver a solution on the global scale.
With many European leaders pushing for this sense of urgency in the need for an agreement on digital taxation, it is important to note that some of these countries out of frustration due to the lack of progress on the subject have enacted a digital tax of their own in the meantime. Their frustration stems from the fact that major digital companies such as Google are able to enjoy annual revenues of great amounts while enjoying effective tax rates in the single digits on their profits made overseas. Some of the European countries to have enacted their own digital tax are Italy, Britain, Spain, and most notable, France. France enacted a 3% digital tax that appeared to be specifically targeting major U.S. digital giants which lead to threats of tariffs from the United States and opened an investigation and the potential discrimination against the U.S. the new French law would bring.
What may come as a surprise to some people, Facebook’s Mark Zuckerberg is planning in a speech, accepting that these new global tax reforms would mean that his company which is part of GAFA as previously mentioned, would have to begin paying more in taxes in various parts of the world. What will come from this meeting over the weekend is unknown, but the topic surrounding digital taxation and the global necessity has been on many official’s minds over the past couple of years.
Officials are hoping to reach an agreement about the ‘how much’ and ‘where’ digital tax should be and take place by as early as July of this year. If this happens, they then would be able to have in place a full accord by the end of the calendar year in hopes of avoiding further escalation in trade tensions between various countries. As stated in the article, members of the EU have mentioned that if no agreement is reached with all members of the G20, then their 27 members will respond by enacting their own digital tax system. I do think it is also important to point out the article having come from a european source, may not necessaryily see the consequences of this response, however, if it does come to this it will be interesting to see how things play out if the EU goes through with their own digital tax system
After this meeting, it will be interesting to see if any progress has been made, or if as a result tensions worsen between certain countries. One can hope that sooner rather than later, that the G20 members come to an agreement for the sake of trade in order to keep the threat or tariffs or future trade wars at bay.