EU delays plan to tax internet tech giants after G20 endorses overhaul

In light of worldwide attempts to agree on a minimum corporation tax rate of 15%, the EU has announced that it will postpone plans to tax internet tech giants. The decision comes after G20 finance ministers decided to support the global effort to overhaul taxes over the weekend, and it will now be presented to G20 presidents in October.

The EU said that putting its own plan on hold would make achieving “the last mile” of the international agreement simpler. Ireland, on the other hand, has stated that it will maintain its lower tax rate of 12.5%.

“We have decided to put on hold our work on our new digital levy,” European Commission spokesman Daniel Ferrie told BBC.

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The news came during US Treasury Secretary Janet Yellen’s visit to Brussels, where she encouraged all 27 EU members to join the global agreement. “We need to put an end to corporations shifting capital income to low-tax jurisdictions, and to accounting gimmicks that allow them to avoid paying their fair share,” she told BBC.

Deputy Prime Minister Leo Varadkar of Ireland, on the other hand, stated his country’s 12.5% corporation tax rate had “worked for Ireland” and that the reform proposal was about “big countries trying to get a bigger share of the pie”.

“We’ve taken about €10bn a year in corporation profit tax, double what the average European country does per head,” he told BBC. “It’s one of those examples of where low taxes result in higher revenues, in a world where wealth capital, labour, corporations are very mobile.”

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Governments have long struggled with how to tax multinational corporations that operate in many countries. With the rise of large internet companies like Amazon and Facebook, this problem has only intensified.

Efforts in the UK and EU to tax the internet behemoths have enraged the US, which believes its businesses are being disproportionately affected. Now, however, there is strong support for a plan to have multinational businesses pay their “fair share” of tax throughout the world.

The framework has been signed by 132 nations so far, but it still has to be ratified by their parliaments, including the US Congress, where Republicans may try to prevent it.