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The taxman cometh, albeit slowly

Paul Brislen, Editor. 12 June 2019, 7:03 am

Finance ministers from the G20 nations have agreed to press ahead with plans to reform the global tax regime to limit the amount of tax avoidance currently carried out by some of our largest tech companies.

A draft communique prepared for the G20 meeting has been shown to Reuters news agency and says the group of the world's largest economies will work to produce a final report into the issue by 2020.

This dovetails with the New Zealand government's discussion document on tax issues that says if significant progress isn't made by 2020 towards a global (or at least wide spread) solution, New Zealand would introduce its own tax on digital transactions of around 2-3%.

Anything that requires multiple countries to work together is likely to be fraught and tedious and this issue is unlikely to be any different. While Britain and France have been most vocal in calling for a new tax model, the US (home to most of the tech giants often quoted in this debate) is troubled by the suggestion.

The amount of tax paid by tech giants like Google, Apple, Amazon and Facebook is coming under increasing pressure as these companies move profits around the world to minimise tax paid in each jurisdiction. Google, for example, recently announced it had made a small loss in the New Zealand market and paid just $398,341in tax for the previous year.

Meanwhile in the UK, it appears that Amazon Web Services paid only £1.7m in corporation tax on profits of £72.4m for the 2017 period, despite the UK government spending £660m with AWS in the past four years.

The G20 meeting will release its official communique at a full meeting in Osaka later in the month. From there, assuming agreement is reached, the matter is handed on to the OECD to develop into actual legislation. That's not expected to be available before 2025 at the earliest.


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