The European Union is suspending its plans to tax online tech giants in the face of global efforts to agree on a minimum tax rate of 15% for companies.<\/p>\n\n\n\n
Earlier this week, G20 finance ministers agreed to support the global effort that will now be presented to G20 leaders in October.<\/p>\n\n\n\n
The announcement coincided with U.S. Treasury Secretary Janet Yellen’s visit to Brussels, where she urged all 27 EU countries to join the global agreement.<\/p>\n\n\n\n
Despite the agreement of most EU member nations, Ireland said it would maintain its lower tax rate of only 12.5%.<\/p>\n\n\n\n
Governments have long struggled with the issue of taxing global companies operating in many countries – a challenge that has grown with the ubiquity of big tech groups like Amazon and Facebook.<\/p>\n\n\n\n
Efforts in Britain and the EU to tax the online giants have led to tensions with the U.S., which feels it is being treated unfairly.<\/p>\n\n\n\n
Yet there is broad support for a plan to make multinationals pay their “fair share” of taxes around the world.<\/p>\n\n\n\n
132 nations have signed the framework, but it needs ratification by their parliaments – including the U.S. Congress, where it faces Republican opposition.<\/p>\n\n\n\n
Companies can currently set up local offices in countries with relatively low corporate tax rates and declare profits there.<\/p>\n\n\n\n
That is, they pay only the local tax rate, even if the profits come mostly from sales elsewhere.<\/p>\n\n\n\n
The new agreement aims to prevent this in two ways.<\/p>\n\n\n\n
Firstly, it aims to make companies pay more tax in the countries where they sell their products or services, rather than where they declare their profits.<\/p>\n\n\n\n
Second, a global minimum tax rate would help prevent countries from undercutting each other through low tax rates.<\/p>\n\n\n\n
Not everyone is enthusiastic about this new deal.<\/p>\n\n\n\n
In addition to Ireland, Hungary and Estonia are also opposed to plans to make rates uniform in general.<\/p>\n\n\n