by Lorys Charalambous, Tax-News.com, Cyprus
03 March 2020
The finance ministers of France, Germany, Italy, and Spain have put their names to a statement calling for countries to reach an agreement on solving the tax challenges of the digital economy by the end of 2020.
The statement was posted on the website of the German Ministry of Finance on February 22, 2020, against the backdrop of talks between G20 finance ministers, at which the subject of taxing digital companies was high on the agenda.
“The challenge of our time is to create a new international tax system that is ready for the 21st century. We have a shared responsibility to reach global agreement on this by the end of the year. We now have a unique opportunity to reshape the global tax system so that it becomes fairer and more effective,” they said.
The statement notes that current problems are two-fold: that the profits of large technology companies – “be they American, European or Chinese,” are not adequately taxed; and that companies are still using aggressive tax planning strategies to shift profits to low-tax jurisdictions, in turn distorting competition.
“The OECD has been working on detailed proposals to address these two weaknesses in the current tax system for some time. Now is the time to reach a comprehensive agreement, both on a fair distribution of digital tax revenue and on global minimum taxation. We are committed to finding an international solution by the end of 2020 and will work tirelessly to reach agreement within the OECD,” the ministers said.
The statement was issued as G20 finance ministers once against discussed the issue of taxing digital companies in Riyadh, Saudi Arabia, with reports suggesting differences in opinion remain between the United States and other nations on the most appropriate measures.
While the majority of countries engaged in the talks appear to support changes to existing rules that would enable companies to be taxed despite lacking a physical presence in a jurisdiction, the US continues to press the case for a “safe harbor” regime, which could potentially make the adoption of an internationally agreed tax framework optional.