UK Think Tank: "According to G7 Agreement, US Big Tech Taxes May Actually Decrease"

Taxwatch "Applying the Digital Services Tax Introduced Last April Would Increase Tax Revenue"

[Photo by Reuters-Yonhap News]

[Asia Economy Reporter Park Byung-hee] According to an analysis, if the agreement reached by the Group of Seven (G7) finance ministers at the London meeting on the 4th and 5th is implemented, the taxes paid by U.S. big tech companies such as Google to the UK would actually decrease.

On the 8th (local time), major foreign media reported that the UK think tank Taxwatch analyzed that, based on the G7 finance ministers' agreement, the total amount of taxes paid by Amazon, eBay, Facebook, and Google to the UK government would decrease by ?23.25 million.

The G7 finance ministers agreed on a plan to tax multinational corporations that earn significant profits at a minimum rate of 20% on the portion of profit exceeding a 10% profit margin in the country where the revenue is generated. The UK Treasury stated that this agreement would lead multinational companies to pay more taxes to the UK government. However, Taxwatch pointed out that if the UK government signs this agreement, it would collect less tax from eBay, Amazon, Google, and Facebook.

This is because signing the G7 agreement requires abandoning the Digital Services Tax (DST) introduced last year. Since April of last year, the UK has imposed DST on social networking services (SNS), search engines, and online marketplace companies, levying a 2% tax on companies with revenues exceeding ?25 million.

The problem is that if the UK signs the G7 agreement, it will no longer be able to collect DST. According to the G7 agreement, countries that sign must abandon their independently introduced digital taxes.

Taxwatch compared and analyzed the tax differences between applying the UK's DST and the G7 finance ministers' agreement, concluding that maintaining the digital tax would allow the UK to collect more taxes from U.S. big tech companies. The analysis estimated the tax amounts based on the 2019 performance of companies like Google, before the COVID-19 pandemic.

Taxwatch analyzed that under the G7 agreement, the tax collected from Google would sharply decrease from ?21.9 million to ?6 million. Facebook's tax would drop from ?4.9 million to ?2.77 million, and eBay's tax would decrease from ?1.57 million to ?380,000. Taxwatch also predicted that eBay might be excluded from the G7 agreement's tax base due to its smaller scale.

According to the current UK DST, Amazon must pay ?5.01 million in taxes, but under the G7 agreement, it may not be subject to taxation because Amazon's profit margin is below 10%. However, the Organisation for Economic Co-operation and Development (OECD), which is leading the global corporate tax discussions along with the G7, intends to establish detailed criteria to include Amazon in the tax base. In this regard, there is speculation that Amazon Web Services (AWS), Amazon's cash cow, will be recognized as a separate independent entity to serve as a basis for taxation.

Taxwatch pointed out that even if AWS becomes subject to taxation, the tax amount payable under the G7 agreement would be only ?1.01 million, which is less than the tax collected under the UK DST.

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