G20 to redesign corporate tax distribution, allowing countries to tax tech giants according their business footprints

Written by Luna Lin Published on 

Goodbye to tax havens.

G20 countries are nearing an agreement to redesign corporate tax policy, allowing countries with large user bases for the world’s tech giants to retain some part of the tax revenues, Nikkei Asian Review reports.

The new tax collection rule would allocate revenue based on the scope of a company’s business in different countries rather than the location of the company’s headquarters. Finance ministers and central bank directors of the G20 countries will meet next month in Fukuoka, Japan, and the nations will seek to reach a final agreement in 2020, unnamed sources cited in the report said.

Under the new tax regime, multinational tech giants are less likely to be able to avoid taxes by routing their profits to low tax countries or tax havens.

Take Facebook as an example. The social networking giant has nearly 380 million users in Southeast Asia as of January 2019, but it managed to pay minimal taxes to the region’s countries by centralizing its profits and tax payments in Ireland, where tax rates are much lower.

Earlier this year, the Malaysian government passed a bill allowing the country to collect a 6% digital service tax on foreign digital service providers from 2020 onward. As of April 2019, more than 20 countries and regions have passed digital tax laws, according to research by invoicing app Quaderno.


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