Facebook, Google, Amazon, Uber, these are some of the top tech giants that are working globally, and in the past few years, questions have been raised on the tax these companies have been cutting off by shifting to low tax countries. The financial authorities of the developed countries have always seen this as an unfair move, as they earn complete profits but pay lesser tax.
To resolve this problem, the finance ministers of the G20 countries have finally agreed on imposing new rules on those tech companies, such that they will now pay taxes based on their profits and in which countries they are serving, instead of where they are based.
G20 is an international organisation, comprising of world’s 19 biggest economies and the Europian Union, making a total of 47 countries, that works towards economic stability.
Reuters reported the news first, through a draft communique obtained by the former, according to which, the G20 companies will compile common rules to close the loopholes for the tech companies. Though the low tax had been beneficial for small countries to attract international tech giants.
The new rules will include a two-pillar approach. According to the first pillar, the tax will be based on two things, what are the services or goods that the companies will be providing and where these companies are operating. The second pillar will impose a minimum tax rate on every company, such that even the services are moved to another country, the basic tax will be the same.
“We welcome the recent progress on addressing the tax challenges arising from digitization and endorse the ambitious program that consists of a two-pillar approach. We will redouble our efforts for a consensus-based solution with a final report by 2020.” stated the draft communique.
For the support of the agreement, countries like France and Britain have been quite supportive as the tech giants strategically pay lesser tax in those countries. But upon this, the U.S. based companies have also raised the concern of being most targeted by the European countries.
The finalisation of the rules for the taxes to be imposed on the global tech companies is still under process. But according to the reports, G20 will release the final report on the new rules in 2020.
Yashica is a Software Engineer turned Content Writer, who loves to write on social causes and expertise in writing technical stuff. She loves to watch movies and explore new places. She believes that you need to live once before you die. So experimenting with her life and career choices, she is trying to live her life to the fullest.