A group of G20 finance ministers met over the weekend to discuss closing loopholes used by tech giants to reduce their corporate taxes.
The hope is that common rules across would stop companies like Apple booking their profits in low-tax countries, such as Ireland. This is currently done regardless of where end customers may be located.
“At the moment we have two pillars and I feel we need both pillars at the same time for this to work,” said Japanese finance minister Taro Aso.
“The proposals are still a little vague, but they are gradually taking shape.”
“We truly believe that the tech giants, which are not only the GAFA, must pay their fair share of tax where they create value and profits,” said Pierre Moscovici, the European Union Commissioner for Economic Affairs. GAFA refers to Google, Amazon, Facebook and Apple.
The ‘two pillar’ approach
According to Reuters, there are two “pillars” the proposals rest upon:
“The first pillar is a plan to divide up the rights to tax a company where its goods or services are sold, even if it does not have a physical presence in that country. If companies are still able to find a way to book profits in low-tax havens, countries could then apply a global minimum tax rate to be agreed under the second pillar.”
Whether the results of these talks wind up being signed into law remains to be seen. While this topic has certainly seen increased momentum recently, there are still hurdles.
Not only will tech companies likely push back, but getting different countries with different priorities to agree is also a challenge. For example, Britain and France have a very different view to the U.S., which worries that American tech companies are being unfairly targeted.