A fair digital taxation system
profits should be required to pay taxes commensurate with this situation.
It is worrisome that conflict is growing among countries over the establishment of international rules.
Financial ministers and central bank governors of the Group of 20 major economies discussed digital taxation earlier this month, but no progress has been made. It appears it will be difficult for them to meet the goal of reaching a final agreement by the end of this year.
The Organisation for Economic Cooperation and Development, which is coordinating discussions on this issue with the G20, announced in January that countries concerned had reached a broad agreement on introducing a system that would enable them to impose taxes on companies according to their sales, even if they do not have bases in these countries.
However, the administration of US President Donald Trump, which wants to protect companies in its own country, reportedly made a proposal that would allow companies to decide for themselves whether to follow the envisioned system.
In June, t he administration suggested a pause in t he discussions. It claimed t hat t his was so priorit y could be given to ef forts to deal with the Covid-19 pandemic, but was likely meant to put pressure on Britain, France and other European countries t hat are considering t heir own ta xation plans. The Trump administration’s disregard for r ulemaking is unacceptable.
There is also strong dissatisfaction with tax evasion by tech giants in the US. A fair taxation system would surely benefit the US as well.
It is not surprising that Europe and other countries oppose the US proposal for allowing companies to choose whether to follow the envisioned digital taxation system, claiming that such a stance would water it down. In addition to European countries, Brazil and other emerging economies have made moves for their own digital taxes.
The US is hinting at imposing punitive tariffs on these countries. If economic friction develops, it could deal a further blow to the world economy, which is already suffering from the pandemic. European and emerging economies are also urged to focus on international cooperation rather than taxation systems that put their own interests first.
Should the international talks fall apart, Japan would also lose tax revenue that would be generated under the envisioned system. The government must make every effort to move the discussions forward.