Digital economy could face harsher taxes

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Europe is looking into higher taxes for digital companies, something that not everyone agrees on, according to a communique released after the recent G20 summit in Buenos Aires, Argentina.

The meeting of finance ministers and central bankers ended with many conclusions, one of which being that the shift to the digital economy will impact the international tax system, and that the impact needs to be addressed by 2020.

Earlier this year, the European Commission (The EU's executive arm) proposed higher taxes for digital companies. American companies, such as Amazon, Google, or Facebook, would bear the brunt of these changes. At the time, it was estimated that the EU would raise an additional $6 billion in taxes this way.

At the G20 meeting, European Commissioner for Economic and Financial Affairs Pierre Moscovici said such a scenario would be 'fair'. Not everyone agrees, and some members said this would prompt international partners to 'retaliate'.

“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.

Australia Treasurer Scott Morrison said the root of the problem is that 'no one knows' how to measure the value of the data Facebook's (for example) outside the US create, and how much tax that would require.

“We’re not convinced at this point about the efficacy of those interim measures - which is basically a sales tax on digital advertising,” Morrison said. “It is more important to focus on those technical issues rather than the pot-of-gold approach, which is how much revenue can be raised.”

Image source: Shutterstock/MaximP

Topics

tax
eu
g20