Recently,G20 finance ministers at a meeting Japan has agreed to compile common rules to close loopholes used by global tech giants to reduce their corporate taxes.
Global technology firms such as Facebook, Google, Amazon and others face criticism for cutting their tax bills by booking profits in low-tax countries regardless of the location of the end customer.Such practices are seen by many as unfair.
The G20’s debate on changes to the tax code is focused on two pillars -:The first pillar was 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.
The second pillar was to decide on a global minimum tax rate to prevent companies from finding a way to book profits in low-tax or offshore havens.
The new rules would mean higher tax burdens for large multinational firms but would also make it harder for countries like Ireland to attract foreign direct investment with the promise of ultra-low corporate tax rates.
Britain and France have been among the most vocal proponents of proposals to tax big tech companies.However,countries such as the United States has expressed concern that US companies were being unfairly targeted in a broad push to update the global corporate tax code.
G20 is an international forum of the governments and central bank governors from 20 major economies formed in 1999.The group accounts for 85% of world GDP and two-thirds of the population.They have no permanent staff of its own and its chairmanship rotates annually between nations divided into regional groupings.