Sunday 9 June 2019 2:23 pm

G20 vows to crack down on tech giant tax havens by 2020

Tech giants such as Facebook and Google will face a crackdown to ensure they pay their corporate taxes in full, after G20 finance ministers vowed to wrap up new laws by the end of the year.

In a communique issued after a meeting in Japan, the finance ministers said they would compile new rules to close controversial tax loopholes by 2020.

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Tech firms have come under heavy criticism for reporting their profits in low-tax countries in a bid to reduce their tax bills.

The new laws would force the companies to pay larger tax bills regardless of their location. But it would also make it harder for countries such as Ireland to lure in multinational firms with the promise of low corporate tax rates.

“At the moment we have two pillars and I feel we need both pillars at the same time for this to work,” Japanese finance minister Taro Aso told reporters, according to Reuters. “The proposals are still a little vague, but they are gradually taking shape.”

Discussions over a potential tightening of tax laws have been rocked by disagreements between different states.

The UK and France have both set out plans for new taxes on tech firms, but the US has expressed concerns that American companies have been unfairly targeted by the new rules.

“We welcome the recent progress on addressing the tax challenges arising from digitisation and endorse the ambitious program that consists of a two-pillar approach,” the G20 said in the communique.

“We will redouble our efforts for a consensus-based solution with a final report by 2020.”

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Under the so-called two-pillar approach, a company could first be taxed where its goods or services are sold, even if it does not have a physical presence in that country.

If firms are still able to report their profits in low-tax areas, countries could then apply a global minimum tax rate.