G20 agrees on digital taxation reforms

Major countries have agreed to proceed with a digital tax deal by which multinational businesses such as Google and Facebook will have to fulfill tax obligations in a nation where their sales are generated.

G20 leaders on Saturday agreed on a digital tax proposal in a meeting held in Rome, Italy, according to Reuters and The Associated Press. The agreed proposal involves two key changes in how multinationals pay taxes.

First, a new type of tax is levied on multinational businesses which dodge tax responsibilities despite a large profit generated in the global market by setting up a company in a tax haven. With the new proposal put in place, starting form 2023, multinationals with an annual sale of more than 20 billion euros (about 27 trillion won) and an operating profit of more than 10 percent are supposed to pay a tax that is equivalent to 25 percent of profit margins above 10% where their business is based. The South Korean government will also have a great chance to levy more taxes on global companies that generate profits in the domestic market. Samsung Electronics and SK Hynix may be subject to the digital tax.

Secondly, the global corporate tax is to be set at a minimum of 15 percent, which shall be applied to multinational companies with a consolidated sales revenue of more 750 million euros (about 1 trillion won). Thus, many governments may vie to draw more companies by reducing corporate taxes.

German Prime Minister Angela Merkel shared a “good news to report” with press members, saying that global leaders agreed on the minimum tax on companies, which she defined as clear signs of justice being practiced in the digitized world.

U.S President Joe Biden added some meaning to the agreement that it is a diplomatic action that is not merely about tax negotiations but about revamps to the global economy. U.S. Treasury Secretary Janet Yellen said in a statement that this deal will make the global economy a better platform where U.S. companies and workers can prosper further.


Jae-Dong Yu jarrett@donga.com