g20 meeting

EU calls for tax on digital economy at G20 summit

Image credit: reuters

European finance leaders have called for global rules on digital taxation at a meeting of the G20 in Argentina, putting them in opposition to their US counterparts.

According to Reuters, the final communique at the meeting looked at addressing the shift to a digital economy on the international tax system by 2020. No further details were given.

The calls for new taxes follow proposals from the European Commission (EC) in March to introduce a 3 per cent tax on large digital companies which will be applied depending on where their users are based.

It’s estimated that it could raise €5bn and some 200 companies– including Google, Facebook, Amazon and Spotify – would be affected by the charge, half of which are American and a third of which are European.

Major digital companies had “to pay their fair share of tax, because basically what we are talking about here is fairness,” Pierre Moscovici, European Commissioner for Economic and Financial Affairs, told reporters at the G20 meeting.

He said he was calling for a turnover tax to be adopted before the end of the year as an interim solution.

However, some EU members have voiced concerns that their companies could be affected by such a tax and international partners may respond with retaliatory measures.

“One of the big challenges is that taxation of the digital economy is mostly of course a taxation of American companies - because they are the key players in the world - so the United States feel that this is an attack concerning their digital economy, which it isn’t really,” said Hubert Fuchs, European Council representative to the G20, speaking on the sidelines of the meeting.

The G20 (Group of 20) is a forum of the world's major economies, comprising 19 countries and the European Union.

US Treasury Secretary Steven Mnuchin reportedly said in a statement earlier this year that he “firmly opposes proposals by any country to single out digital companies,” noting that those companies were key contributors to the US economy.

Australia Treasurer Scott Morrison said the G20 discussions were useful because they established the root of the problem: that “no one knows” how to measure for tax purposes the value of the data which the users of social media services such as Facebook create outside of the countries where those companies are based.

He said if those technical issues were not resolved, more countries would start taking “interim measures.”

“We’re not convinced at this point about the efficacy of those interim measures, which is basically a sales tax on digital advertising,” Morrison said. “It is more important to focus on those technical issues rather than the pot-of-gold approach, which is how much revenue can be raised.”

The European Commission wants a long-term, global solution based on a new method of calculating tax rates, but in the meantime is pushing for the revenue tax to recoup revenues lost by EU states to large digital firms, officials said.

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