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Tokyo – The Finance Ministers of the Group of 20 decided Sunday to set common rules to close loopholes used by global technology companies such as Facebook to reduce their corporate taxes.
Facebook, Google, Amazon and other major technology companies are being criticized for reducing their taxes by recording profits in low-tax countries, regardless of where the end customer is located . Many people consider these practices to be unfair.
The new rules would impose heavier tax burdens on large multinational corporations, but would also prevent countries such as Ireland from attracting foreign direct investment with the promise of extremely low corporate tax rates.
"At the moment, we have two pillars and I think we need both at the same time to make it work," Japanese Finance Minister Taro Aso, who chaired the G20 meetings, told the press. "The proposals are still a little vague, but they are gradually taking shape."
Britain and France have been among the strongest proponents of proposals to make it more difficult to transfer profits to low-tax jurisdictions, with a minimum corporate tax also in the mix. he said he is concerned that US Internet companies are unfairly targeted as part of an extensive campaign to update the global code of corporate tax.
The big Internet companies claim to follow tax rules, but they pay little tax in Europe, usually channeling sales via countries such as Ireland and Luxembourg, which apply lighter tax regimes.
"We welcome recent progress in solving the tax problems related to digitization and endorse the ambitious program of a two-pillar approach," said the G20 Sunday Communiqué. "We will redouble efforts to reach a consensual solution with a final report by 2020."
The "two pillars" of the G20 could give a double blow to some companies.
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