G20 to Crackdown on Tech Giants with New Tax Evasion Measures

tax evasion

Changes to the global corporate tax framework made by 2020 would see low-tax havens finding it increasingly challenging to attract foreign direct investment.

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Global tech giants will soon be required to pay more in taxes after G20 finance ministers co-ordinated a crackdown on corporate tax loopholes which international tech businesses have been exploiting.

The proposals announced in a communique at a meeting between ministers in Fukuoka, Japan, outlined how tech firms like Google and Facebook will have to conform to stricter tax regulations.

In a radical overhaul of corporate tax rules, the new measures will take a “two-pillar” approach that will see companies pay more in countries despite the lack of a physical presence and profit in those regions. The regulations are set to be rolled out in 2020.

Companies that do not adhere to the new measures will then be subject to a global minimum tax rate. Silicon Valley firms have often come under scrutiny for profiting from locating in low-tax countries, despite delivering services to their customers across borders.

Both Google and Facebook’s European headquarters are in Ireland, where the corporate tax rate is 12.5pc. However, other European nations such as France set their tax rates for large, multinational firms at more than double Ireland’s corporate levy.

The Communique stated: “We welcome the recent progress on addressing the tax challenges arising from digitisation and endorse the ambitious program that consists of a two-pillar approach”.

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However, the White House may take serious measures against any tax crackdown as Washington plans to retaliate against European officials by imposing new taxes on US tech firms.

Jennifer McCloskey, vice president of policy at the Information Technology Industry Council, a trade association headquartered in the US capital, said any taxes perceived to be discriminatory against American companies could face an investigation.

US Treasury Secretary Steven Mnuchin has also said that the US “has significant concerns with the two current taxes that are being proposed by France and the UK”.

Meanwhile, both the UK and France have been the strongest supporters of a crackdown on evasive tax practices, with the countries planning to introduce a digital services tax.

A consensus on a tech tax was due to be agreed on by European countries in December, however, talks have been stalled by countries opposed to a tax and arguments over a policy that would be effective for the entire bloc.



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