Taxes might increase for multinational conglomerates like Apple, Amazon, and Google as many nations are looking at it as a way to cope up with the post-economic crisis of COVID-19. Large advanced economies like the United States, Britain, and others have reached a landmark deal last weekend which will lead to higher global taxation of these huge tech giants. In total, seven large economies have agreed upon this new minimum global corporate rate of at least 15 percent and also to pay more tax in the markets where they operate in terms of selling products.
The new global tax system has been revised in accordance with the global digital situation and taking in consideration the post-pandemic crisis. Rishi Sunak, British Finance Minister, made a comment that the G7 finance ministers have landed its conclusion to reform the global tax system thus making it fit for the global digital age. Janet Yellen, US Treasury Secretary, said that “significant, unprecedented commitment, would end the race to the bottom of the global taxation system (Gadgets 360).
Global Taxation System
Many new amendments have been made in the new form of the global taxation system as it promises to end the national digital services taxes levied by many European countries including Britain. According to the United States, this service tax was biased and exclusively targeted the US-based tech giants. All the other measures and the final agreements are not yet decided. A meeting of the G20 will be held next month in Venice which will include many emerging economies to discuss more terms about this new rule. Rishi Sunak has said that the entire process is completed and this is just the first step.
Apart from the elevation in the tax rate, a few other major concerns will also be expressed in the upcoming days. The ministers of these nations have decided that the tech giants should clearly lay out their environmental impact in a direct and standard way. This will help the potential and new investors to decide if they want to invest in a particular company or not. This is one of the key goals for Britain and it will also increase the transparency between a company and the investors.
The big tech companies are always targeted by governments as they dominate the market and yet pay a little tax as compared to their annual revenue. It’s been quite a long time that economically superior nations have tried to raise more revenue from Apple, Google, Amazon, etc.
Nations supporting this new Taxation System
With support from the US government, the Biden administration has proposed the minimum global corporation tax rate of 15 percent, above the level in countries like Ireland and below the lowest level in G7 (Gadgets 360). Both Germany and France have agreed to this agreement but the French Finance Minister has said that he would fight for a higher global corporate tax rate and that’s a “starting point.”
The path to the final agreement will not be very smooth as the tech giants won’t agree to pay a very high rate of tax easily. These multinational companies have a huge market in every continent especially Europe, America, and Asia. So, both the high-end corporations and the government have to find a way to co-exist peacefully.
The German finance minister has added that these tech giants won’t be able to get rid of paying high tax anymore by booking their profits in the lowest-tax countries. Ireland has a tax rate of 12.5 percent and its finance minister said that the global deals before coming to a final decision should consider the scenario of smaller nations as well. Sunak further added, though the deal is advantageous for the nation’s economy, it is uncertain how much money Britain would raise.
It is yet to decide exactly which companies will fall under this new rule as till now the agreement only mentions large multinational enterprises. But, the main companies on the list are Google, Amazon, Facebook, and Apple.
Annasha Dey is an NIT student, who apart from studying engineering is also a content writer. She has a great interest in photography, writing, reading novels, and travelling as well. She is a foodie who loves socializing and hanging out with her friends. She is also a trained Kathak dancer and a big fashion enthusiast. Dey also loves watching TV series, which includes F.R.I.E.N.D.S. and Big Bang Theory. To be a better writer she prefers to read more