AP "G20 Leaders Endorse Global Digital Tax Agreement" (Summary)

[Asia Economy Reporter Yujin Cho] The leaders of the Group of Twenty (G20) officially endorsed a global digital tax agreement aimed at preventing tax avoidance by multinational corporations such as Google, Apple, and Facebook during the summit held in Rome, according to major foreign media including The Wall Street Journal (WSJ) on the 30th (local time).

The agreement includes a provision on the allocation of taxing rights to the "country of revenue generation (market jurisdiction)," which stipulates that taxing rights on the revenues of large corporations with annual sales exceeding 20 billion euros (approximately 27 trillion KRW) and profit margins above 10% will be allocated to the market jurisdiction.

This means that global corporations earning profits in various countries will be required to pay taxes not only in their home countries but also in the countries where they actually provide services and generate profits.

From 2023, applicable companies must pay taxes to each market jurisdiction on 25% of the excess profits exceeding the ordinary profit margin (10%) of their global sales.

Additionally, starting in 2023, a global minimum tax rate of 15% will be applied to multinational corporations with consolidated revenues of 750 million euros or more. Accordingly, multinational corporations will be required to pay at least 15% tax regardless of the country in which they operate.

Earlier, the OECD-G20 Inclusive Framework (IF) finalized this agreement at its 13th plenary meeting on the 8th of this month, with the support of 136 out of 140 countries.

Mathias Cormann, Secretary-General of the Paris-based Organisation for Economic Co-operation and Development (OECD), stated, "The approval of this digital tax will make international tax agreements operate more fairly."

The WSJ reported that the United States is expected to be the biggest beneficiary of the implementation of this digital tax. According to experts, the increase in U.S. tax revenue resulting from the introduction of the digital tax is expected to be 15 times that of China.

The G20 officially began the process of overhauling the international tax system, which had been in place for 100 years, in 2013. Subsequently, with the urgent need to secure funds for economic reconstruction due to the COVID-19 pandemic, the Biden administration actively pursued revenue collection, accelerating discussions on the global digital tax.

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