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G-20 to give up agreeing tax rules on digital giants this year

The finance chiefs of the Group of 20 major economies kick off their two-day meeting in Riyadh on Feb. 22, 2020. (Kyodo)

TOKYO (Kyodo) -- The Group of 20 major economies will likely give up agreeing this year on new international taxation rules for digital giants like Google LLC and Apple Inc., which have been seen as taking advantage of low-tax jurisdictions, sources familiar with the plan said Wednesday.

    The G-20 finance ministers and central bank governors, who had aimed to release a final report by 2020, are now expected to express their commitment to continue negotiations toward an agreement next year in a statement to be released after their teleconference on Oct. 14, the sources said.

    The move reflects gaps between the United States, which opposes targeting American technology heavyweights also including Facebook Inc. and Amazon.com Inc., and European members pressing for taxing such companies appropriately where they make huge profits.

    The G-20 countries have found it difficult to come to terms with the United States ahead of the presidential election in November, the sources said.

    The nations had initially set a goal of reaching a basic agreement on the new rules in July, but their work has been delayed due to the coronavirus pandemic.

    The new rules, proposed by the Organization for Economic Cooperation and Development, are being discussed in response to criticism that some companies are not paying their fair share of taxes.

    The existing rules are based more on where firms' permanent offices and plants are located rather than where they make their sales.

    Under the envisaged rules, global tech giants that generate revenue by offering consumer products or digital services will be taxed based on their sales even in countries where they are not physically present.

    The OECD said in January that over 130 countries and regions had broadly agreed on an outline of new taxation rules for companies operating in the digital space globally.

    But the Paris-based organization also said that "significant divergences" remained among its members, after the United States sought to set a "safe-harbor" condition, which would allow companies to still choose to operate under the current taxation rules.

    Other OECD countries have expressed concerns that such a provision could "increase uncertainty and fail to meet all of the policy objectives of the overall process," according to the organization.

    The OECD has said it will publish a report on the latest negotiations on the digital tax challenges on Monday.

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