G20 meeting: European finance leaders for global digital tax rules

Nearly 200 firms, including Google, Facebook and Amazon, fall within tax scope

European finance leaders called for progress on global rules to tax the digital economy at a meeting of G20 finance ministers and central bankers in Argentina on Sunday, putting them at odds with US counterparts.

The final communique reaffirmed a commitment to address the impacts of the shift to a digital economy on the international tax system by 2020, without giving more details. 

The European Commission, the executive arm of the European Union, proposed rules earlier this year to make digital companies pay more tax, with US tech giants such as Alphabet’s Google, Facebook and Amazon set to foot a large chunk of any bill.

Some 200 companies would fall within the scope of the new tax, European officials said at the time, estimating additional annual revenues of about ^5 billion ($6 billion).

Major digital companies had “to pay their fair share of tax, because basically what we are talking about here is fairness,” European Commissioner for Economic and Financial Affairs Pierre Moscovici told reporters at the G20 meeting.

He said he was calling for a turnover tax to be adopted before the end of the year as an interim solution. 

However, some EU members have voiced concerns their companies could be affected by such a tax and international partners may respond with retaliatory measures.

“One of the big challenges is that taxation of the digital economy is mostly of course a taxation of American companies - because they are the key players in the world - so the US feel that this is an attack concerning their digital economy, which it isn’t really,” European Council representative to the G20 Hubert Fuchs said on the sidelines of the meeting.

The US delegation was not immediately available for comment. US Treasury Secretary Steven Mnuchin said in a statement earlier this year that he “firmly opposes proposals by any country to single out digital companies,” noting that those companies were key contributors to the US economy.

Calls to step up trade talks; no consensus

Global finance leaders called on Sunday for stepped-up dialogue to prevent trade and geopolitical tensions from hurting growth, but ended a two-day G20 meeting with little consensus on how to resolve multiple disputes over US tariff actions.

The finance ministers and central bank governors from the world’s 20 largest economies warned that growth, while still strong, was becoming less synchronized and downside risks over the short- and medium-term had increased.

“These include rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies,” the G20 finance officials said in a communique.

“We ... recognise the need to step up dialogue and actions to mitigate risks and enhance confidence,” the communique said.

This marked a strengthening of language compared to their previous statement issued in March, in which they simply “recognise the need for further dialogue.” 

“The latest language suggests a great deal of urgency about resolving these issues,” Australia Treasurer Scott Morrison told Reuters in an interview, adding that the ministers had made it clear in the discussion that they were concerned about “tit-for-tat measures” and that open trade was the goal. 

“The language previously had been a bit ambiguous about that, a bit sheepish.”

The weekend talks in Buenos Aires came at a time of escalating rhetoric in the trade conflict between the United States and China, the world’s largest economies, which have so far slapped tariffs on $34 billion worth of each other’s goods.

US President Donald Trump raised the stakes on Friday with a threat to impose tariffs on all $500 bn of Chinese exports to the US unless Beijing agrees to major structural changes to its technology transfer, industrial subsidy and joint venture policies.