Large tech companies moving to countries from which it is possible to operate more cheaply, because of favourable tax rates; it happens often. In an attempt to prevent such practices in the future, 137 countries have joined forces to tighten up tax rules for large companies including Amazon and Google.
By working from countries such as Ireland, where corporate taxes are relatively low, tech giants such as Google, Facebook and Amazon can retain much more of their profits than if they were operating from other neighbouring countries. To prevent a new trade war, it has been agreed with a large number of countries to draw up clearer rules about where taxes have to be paid by large companies, and especially how much tax.
Pressure from Washington
Since it mainly concerns large American companies, threats were already being made from Washington that similar measures would be taken if European countries were to take individual steps to increase taxes for tech giants, but the 137 countries are making progress. An agreement should be in place by July of this year, with completion planned for the end of the calendar year.
To soothe allegations from Washington, it has been decided that not only providers of digital services (such as Facebook and Google) will be covered by the new rules. More traditional companies that supply directly to consumers will also have to comply with the new rules.
Developing countries, however, questioned the drafting of the new rules, as they state that countries have the right to apply a certain income threshold depending on their economy. Something that, according to developing countries, would be to the advantage of an already developed nation.