MercoPress. South Atlantic News Agency

G20 begin talks on global rules to tax the digital economy

EC proposed rules earlier this year to make digital companies pay more tax, targeting such US giants as Alphabet’s Google, Facebook and Amazon .

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 U.S. 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 U.S. 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 euros (US$ 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 United States 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.

U.S. 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 U.S economy.

Australia Treasurer Scott Morrison said the G20 discussions were useful because they established the root of the problem: that “no one knows” how to measure for tax purposes the value of the data users of social media services like Facebook create outside of the countries where those companies are based.