The G7 Countries Are Preparing a New Digital Tax
“Ministers agreed that it is urgent to address the tax challenges raised by the digitalisation of the economy and the shortcomings of the current transfer pricing system,” said a French summary of the meeting’s conclusions, Financial Times reported.
On Thursday, finance ministers and central bankers from tthe seven largest IMF-described advanced economies in the world (G7) promised to define the outline of a new digital tax by January 2020, the Wall Street Journal reported.
The new tax will be based on the digital and not just the physical presence, according to a summary of the discussions published on Thursday.
Reallocation of profits between countries will depend on the revenue share of companies that come from digital products and services.
However, the proposal for a new digital tax will not include a specific clause targeting major technology companies, which is a major concern for US officials attending the G7 meeting.
Finance ministers said they hope to finalize the tax under the auspices of the Organization for Economic Cooperation and Development (OECD) by the end of next year.
Officials from the G7 central banks, the International Monetary Fund (IMF), the Bank for International Settlements (BIS) and the FSI also presented a report highlighting the risks associated with cryptographic data, and in particular the project of Facebook for the digital currency "Libra".
Digital currencies such as Facebook’s planned Libra raise serious concerns and must be regulated as tightly as possible to ensure they do not upset the world’s financial system, Group of Seven finance ministers and central bankers said on Thursday, according to Reuters.
Numerous currencies, such as the Libra proposed by Facebook, should be "in line with the highest regulatory standards," said the participants in the two-day meeting in Chantilly, France.
The Chantille talks have been dominated by exchanges of views on Facebook's plans for the new Libra cryptobus, amid more serious concerns from politicians that the powers of large technology companies are affecting areas belonging to governments, such as the issuance of their own currency.
The working group led by Benoit Coeure, a member of the executive board of the European Central Bank, noted that the new digital currencies pose "a number of serious risks linked to public policy priorities, including, in particular, the fight against money laundering and countering terrorism financing, consumer and data protection, cyber-resistance, fair competition and tax compliance, "the G-7 summit said.
As regards the economic outlook, central bank finance ministers and governors noted that "global growth appears to have stabilized with the expectation of moderate improvement in 2020, although risks still point downwards (lower than expected growth), "said in a communique from the G7 summit in Chantilly, France.
According to them, fiscal policy must be "flexible and conducive to growth," and central banks should support economic activity, but "recognizing that monetary policy alone can not cope with all the economic challenges."
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