After years of negotiations, the Group of Seven – or G7 – says it is time for a new international tax system.
You agree to a corporate tax rate of at least 15% in countries around the world – unthinkable not so long ago.
Chris Cocozza, tax expert and professor of business administration at DeSales University, says foreign digital services taxes, which are between 3% and 7% of total sales, have led countries to find a solution.
“They are being implemented across the board by different countries,” said Cocozza.
The agreement would not only set a new standard, but also convert this digital service tax into a unified global system.
“And the tech companies are actually happy with it because there is a certain consistency,” said Cocozza. “Tech companies agree that we are saying we will give in to the idea that Google will pay taxes to a country like France when it has no physical presence.”
Of course, each country has to implement its own laws to comply with the agreement, which is easier said than done.
Republicans like Pennsylvania Senator Pat Toomey have argued that this proposal won’t work and will stifle competition.
“The real downer is that the G7 will be able to get the G20 countries to adopt the same provision,” said Cocozza.
So the next challenge will be to get the group of 20 – the G20 – to sign the agreement.
Some countries, like Ireland, have done well with incredibly low tax rates and don’t want to change them.
The hope is that if enough large countries join, there will be pressure on others to do the same.