G20 countries eye tax policy for internet giants

G20 countries are planning a new tax policy for digital giants like Google, based on the business a company does in a country, not where itis headquartered, the Nikkei business daily said yesterday. The basic policy is likely to be signed by finance ministers from the Group of 20 countries when they meet next month in the Japanese city of Fukuoka ahead ofthe main G20 meeting in Osaka, the Nikkei said.

The policy, targeting firms like Google, Apple, Facebook and Amazon, would “allocate revenue to countries that provide large user bases for the world’s digital corporate giants,” the daily said, citing unnamed sources. The countries will seek to reach a final agreement in 2020, but how the policy will work remains to be finalised. One possibility would be to distribute collected tax revenues to countries based on the number of users a given company has in each country.

That could mean that Facebook, which has centralised its profits and tax payments in Ireland to take advantage of low rates, would see its tax payments redistributed to areas where more of its users live. But details of how the tax will be collected and distributed and which companies will be affected remain to be finalised, with the Organisation for Economic Cooperation and Development(OECD) expected to help iron out the rules.

The issue of how to tax top digital companies has become increasingly fraught, with several European nations going it alone, drawing the ire of the United States. The Paris-based OECD is trying to forge a newglobal agreement that would prevent the firms from simply declaring their income in low-tax jurisdictions, depriving other countries of billions in revenue.