[2020 National Audit] Rep. Jeong Il-young: "Digital Tax, a Critical Economic and Diplomatic Issue... Roadmap Needed"

[Asia Economy Reporter Kwangho Lee] Jeong Il-young, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, stated at the Ministry of Economy and Finance's audit on the 8th, "The Ministry of Economy and Finance must prepare countermeasures for the digital tax based on the basic framework agreed upon at the IF meeting last January."

The digital tax refers to a tax imposed on digital transactions provided by global IT companies such as Google, YouTube, and Facebook. It is an international tax measure aimed at resolving the mismatch between value creation and tax jurisdiction allocation by taxing the country where sales occur, regardless of whether the corporation or server is operated there.

Under current international tax treaties, companies do not pay corporate tax in countries where they do not have a fixed place of business such as stores or factories. Meanwhile, global IT companies like Google, YouTube, Facebook, and Netflix provide digital services that do not require a fixed place of business. These global IT companies generate profits without a fixed place of business, resulting in a lack of appropriate taxing rights on the revenue earned in each country, making tax avoidance possible.

Accordingly, the Organisation for Economic Co-operation and Development (OECD) is discussing the introduction of a digital tax to prevent tax avoidance by multinational IT companies, based on the basic plan agreed upon at the IF meeting last January.

Furthermore, the OECD has indicated that companies collecting data through the internet and mobile and utilizing it for marketing, even if they are traditional manufacturing companies, could be subject to the digital tax.

According to materials submitted by the Ministry of Economy and Finance, the Korean government is participating in international discussions on the digital tax and cooperating on international agreements. It has attended 22 OECD-G20 IF meetings and plans to hold public-private task force meetings to identify issues on Korea’s side and strengthen its arguments.

Rep. Jeong emphasized, "The final agreement on the digital tax, which is a global trend, is expected to be prepared within this year," adding, "While achieving tax fairness among countries, domestic companies that are actively exporting should not suffer damage."

He particularly added, "Long-term measures must be prepared in advance to ensure that IT and digital businesses, which are responsible for economic growth and job creation, do not get caught in double taxation or trade disputes," and "Proactive policies are needed to prevent the tax burden on companies from being passed on to consumers."

This content was produced with the assistance of AI translation services.