Tech Firms To Face New Global Tax Rules

The era of a tax-free internet commerce may be coming to an end.

Last month’s Group of 20 summit may have been overshadowed by the US-China trade talks, but the leaders also discussed the rapidly evolving digitization of the world, Japanese Prime Minister Shinzo Abe said. G20 finance ministers agreed at a preparatory meeting earlier in June to compile new rules by next year on a so-called digital tax, designed to close loopholes that technology companies use to book profits in low-tax countries.

The new rules would mean higher tax bills for multinationals such as Google, Apple, Facebook and Amazon. The G20’s plan is to divide up the rights to tax a company based on where its goods and services are sold, rather than where the company is based. The plan could also include a global minimum corporate tax rate. Smaller countries such as Ireland and Luxembourg, which have low-tax regimes, could find it more difficult under the new system to attract foreign direct investment.

Amazon paid nothing in US federal income tax for the second year in a row in 2018, according to the Institute on Taxation and Economic Policy. The company received a tax rebate of $129 million despite profits more than doubling to $11.2 billion last year.