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G20 Finance Ministers Meeting Takes on Taxation of Internet Firms

SNA (Tokyo) — Instead of the open discord over tariffs and trade that many had been bracing for, the main headline story from this weekend’s G20 finance ministers meeting in Fukuoka was the broad agreement on the need for more effective taxation of the global technology firms.

“Taxing internet companies is a big problem for everybody,” explains Martin Schulz, senior research fellow at the Fujitsu Research Institute, “It is obviously a big problem for those countries losing tax income, and also a big problem for those firms that are completing with the major internet companies, which seemingly pay lower taxes.”

One of the key difficulties, however, is where these major internet companies come from—“taxing big digital companies means taxing US companies, almost exclusively,” Schulz notes.

While the Trump administration is sensitive to the possibility that the international movement to better regulate and tax the global internet firms could develop into the character of an anti-US movement, at the Fukuoka G20 meeting the US negotiators took a conciliatory line, effectively giving a “green light” to these international tax reform efforts.

Tax reforms under discussion include establishing a minimum tax rate for firms like GAFA (Google, Apple, Facebook and Amazon) to operate in each country, or to impose code changes that would tax tech companies’ services and sales in a country even if they have no local presence such as offices or warehouses.

Nations like Ireland and Luxembourg—not members of the G20—have offered lower tax rates in to these major internet companies exchange for basing themselves in their countries.

The key element to the tailwind that boosted the atmosphere of the talks was the Friday agreement between the Trump administration and Mexico that avoided the punitive tariffs the US president had threatened over immigration issues. The Mexico tariffs issue had been set to roil the meeting, especially as many Asian nations have factories in Mexico, but the agreement suddenly took this contentious matter off the agenda.

“The overall atmosphere appears to have been surprisingly positive,” Schulz concludes, “but I wouldn’t be too hopeful that this is just the start of a more agreeable G20 Summit in June.”

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