G20 has reached an agreement on imposing digital tax

According to Reuters, G20 finance ministers reached a consensus on Saturday to formulate relevant regulations to plug the loopholes used by global technology giants such as Facebook to reduce corporate taxes. In fact, Facebook, Google, Amazon and other large technology companies have always been clever, because they will choose countries with low taxes to set up branches, and then serve customers around the world. This practice can reduce taxes, and many people believe that this practice violates the principle of fairness.

       For these large multinational companies, the new regulations will mean an increased tax burden. "We are pleased with the progress made in addressing the tax challenges brought about by digitalization and agree to adopt a two-pillar project strategy," the draft communiqué said. "We will work hard to submit a final report by 2020 based on a consensus solution."

      Britain and France have long been advocates of corporate tax proposals that they say would make it harder for big tech companies to shift profits to low-tax jurisdictions, putting them at odds with the United States, which is concerned that American internet companies are being unfairly targeted in a global push for corporate taxation.

      In the past, large Internet companies have stated that they would comply with tax regulations, but in reality they paid almost no taxes in Europe. They sold their products through branches in low-tax countries such as Ireland and Luxembourg.

      The G20's tax adjustment will have a great impact on these multinational Internet companies, and the adjustments are mainly concentrated in two pillars. The first pillar will divide the taxation rights of the place where the company's goods or services are sold, even if the company does not have any actual offices in the country. If the company can still find a low-tax or offshore haven to make a profit, then the relevant country can apply for the world's lowest tax rate based on the second pillar.

      Of course, it will take quite some time to reach a final agreement, as each country still has disputes over the definition of digital business and how to distribute tax rights. "The United States and the United Kingdom have differences on the first pillar. The Group of Seven (member countries include the United States, the United Kingdom, Germany, France, Japan, Italy and Canada) also has disputes on the second pillar." said an official from the Ministry of Finance of Japan who attended the G20 meeting.

      “We cannot explain to the people why some companies are paying taxes when they shift profits to low-tax jurisdictions and therefore do not pay taxes,” French Finance Minister Bruno Le Maire said during the discussion.

The US government is also worried that the EU's digital tax will have a huge impact on US technology giants.