Hong Nam-ki "Remaining Issues of Digital Tax Require Reasonable Consideration by Industry"

Attendance via Video at G20 Finance Ministers and Central Bank Governors Meeting

[Asia Economy Sejong=Reporter Kim Hyewon] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated that "a reasonable consideration of the characteristics of the included industries is necessary" regarding the remaining issues of Digital Tax Pillar 1 (allocation of taxing rights to the country where sales occur), such as the sales attribution criteria and safe harbor provisions.

According to the Ministry of Economy and Finance on the 20th, Deputy Prime Minister Hong attended the '1st G20 Finance Ministers and Central Bank Governors Meeting' held in Jakarta, Indonesia, from the 17th for two days via video conference, and said, "Follow-up discussions such as concluding a multilateral agreement and preparing model rules should proceed swiftly and productively."

Pillar 1, commonly called the 'Google Tax,' is a tax that global large corporations must pay to the market countries where they supply services and generate revenue overseas. Large corporations with an annual consolidated revenue of 20 billion euros (approximately 27 trillion KRW) and a profit margin of over 10% must pay taxes on 25% of the excess profit exceeding the ordinary profit margin (10%) of their global profits to each market country.

In South Korea, Samsung Electronics is highly likely to become the first company to pay the digital tax. The government plans to respond from the perspective of national interests regarding follow-up measures on the digital tax agreement during future G20 discussions.

The three key topics focused on in this meeting were global economic uncertainty, strengthening cooperation, and support for vulnerable countries. Member countries agreed that while the global economic recovery continues, the pace of recovery is slowing due to factors such as variant viruses, and uncertainty is increasing due to the possibility of macro policy shifts in major countries, prolonged supply chain disruptions and inflation beyond expectations, and geopolitical risks.

While recognizing the need for policy implementation according to each country's circumstances, member countries agreed that uncoordinated policies could cause unintended negative spillover effects and thus committed to pursuing coordinated and communicated macro policies.

They also agreed to expand joint efforts to strengthen supply chain resilience and stabilize inflation, including energy prices, and to accelerate discussions on global governance and resource reinforcement, including achieving a 70% vaccination rate by mid-2022, as agreed last October.

Deputy Prime Minister Hong emphasized at the meeting that "the global economy faces downside risks such as macro policy normalization, supply chain disruptions, and inflation, as well as uneven recovery," highlighting the timely normalization of macro policies, strengthened support for vulnerable groups that may be severely impacted during this process, international cooperation to build efficient and stable supply chains, and efforts to improve the global health cooperation system.

He also urged that an optimal policy mix covering price instruments such as emissions trading schemes and non-price instruments such as fiscal and regulatory measures should be prepared, along with policy recommendations considering each country's circumstances through collaboration with international organizations like the Organisation for Economic Co-operation and Development (OECD) during the transition to a low-carbon economy.

Member countries also exchanged views on support measures for vulnerable countries. They reaffirmed their commitment to timely and proper debt restructuring procedures without disruption. They called for the prompt establishment of the IMF's Resilience and Sustainability Trust (RST) and requested expanded support for the RST and the Poverty Reduction and Growth Trust (PRGT) from both member and non-member countries.

Deputy Prime Minister Hong announced plans to contribute 900 million Special Drawing Rights (SDR) (approximately 1.2 billion USD) to the RST and an additional 40 million SDR (50 million USD) to the PRGT and requested participation. Through Facebook, Hong said, "As a co-chair country of the G20 International Financial Architecture Working Group, this is a way to meet the international community's demands commensurate with our economic power and to give back the help our country has received from the international community. I hope that the announcement of the support plan will act as a catalyst to encourage participation from other countries and contribute to this year's G20 slogan, 'Recover Together.'"

This meeting was the first Finance Ministers and Central Bank Governors meeting led by Indonesia, the G20 chair country this year, and most member countries attended via video conference due to the spread of the Omicron variant. The next Finance Ministers meeting will be held in April in Washington DC, USA.

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