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G7 finance ministers, agreement on taxation of digital economy

G7 finance ministers, taxation of digital economy

Finance ministers of the “Group of Seven" (G7) countries at a 17-18 July 2019 meeting in France reached an in-principle agreement with respect to the need for taxing the digital sector and for a minimum worldwide tax on large businesses. The ministers also discussed their common concerns regarding digital currencies.

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According to a release (provided on the website of the French government; France has held the presidency of the G7 since 1 January 2019), the agreement is based on two pillars that would “enable the meaningful construction of a new, fairer, and more effective model of international taxation.” The two pillars relate to the digital sector and minimum taxation and would:

  • Adapt tax rules to tax multinational companies—especially in the digital sector—that create value with little or no physical presence
  • Put in place minimum taxation “to end harmful tax competition between states and the aggressive optimisation pursued by some businesses”

French Minister of Economy and Finance Bruno Le Maire said the agreement highlights the significance of the digital tax issue, and that France preferred a multilateral approach to implementing a digital services tax, but could not wait before implementing one of its own. Since the French legislation passed, the Office of the U.S. Trade Representative (USTR) initiated an investigation under Section 301 of the U.S. Trade Act.

The G7 member states also expressed concerns regarding digital currencies, particularly with respect to compliance. A working group has been established to look at the issue.

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