Frances Ball 31 May 2019 12:15pm

G20 countries to consider tax policy for digital giants

Finance ministers of G20 countries are likely to sign a basic version of a new tax policy on digital giants when they meet next month, according to reports

The ministers will meet in Fukuoka, ahead of the main G20 summit in Osaka in June.

Japanese paper Nikkei reports that they will consider, and are likely to sign, a new policy under which digital giants will be taxed on their business footprint – that is the size of their user base – rather than the current system of taxing according to headquarter location.

Some tech companies have made their own adjustments. For much of its operating history, Facebook channelled its non-US revenue through its low-taxed Irish headquarters.

The social media platform announced in late 2017 that it would begin to pay tax in countries where advertising profits were earned.

Additionally, the 2018 Autumn Budget addressed a UK digital services tax on organisations with a global turnover in excess of £500m, which would include Apple, Amazon, and Google.

Earlier this year, France introduced a 5% digital tax on companies with a global digital revenue of at least €750m (£664m), and a French revenue of more than €25m (£22.2m).

However, there is still controversy over how much tax the big tech companies pay, and where they pay it.

The Organisation for Economic Cooperation and Development (OECD) has been trying to broker a global agreement that would prevent digital companies from solely declaring income in low-tax jurisdictions.

According to news network France 24, the Paris-based OECD is expected to help G20 ministers iron out the new rules. In April this year, French lawmakers passed the first reading of a bill that would impose more taxes on big tech revenues – on profits from advertising and the sale of personal data.

Nikkei pointed out that Facebook alone has over 1.4 billion users worldwide, with 490 million in the Asia-Pacific region, 270 million in Europe, and 180 million in North America.

Recently, research by the Tax Justice Network (TJN) ranked low-tax jurisdictions on how much they contribute to a breakdown of global corporate tax. The TJN put “the lion’s share” of the blame on the UK.