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G20 finance ministers pledge to introduce digital tax by 2020

The G20 finance ministers have pledged their support for the OECD’s two-pillar approach to addressing the tax challenges arising from digitalisation.

G20 finance ministers pledge to introduce digital tax by 2020
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Following their 8-9 June meeting in Tsukuba, Japan, finance ministers agreed to the introduction of digital tax by 2020.

“We reaffirm the importance of the worldwide implementation of the G20/OECD Base Erosion and Profit Shifting (BEPS) package and enhanced tax certainty,” the ministers said in the final communique.

The ministers welcomed the recent progress on addressing the tax challenges arising from digitalisation and endorsed “the ambitious work program” that consists of a two-pillar approach, developed by the Inclusive Framework on BEPS.

“We will redouble our efforts for a consensus-based solution with a final report by 2020. We welcome the recent achievements on tax transparency, including the progress on automatic exchange of financial account information for tax purposes,” the ministers pledged.

Earlier this year, the 129 members of the OECD’s inclusive framework members agreed a policy note that identified the contours of a solution based on two pillars – one addressing the reallocation of taxing rights (Pillar 1) and the other based around a minimum tax to address the remaining BEPS issues (Pillar 2).

Following their meeting in Japan, the ministers also welcome an updated list of jurisdictions that have not satisfactorily implemented the internationally agreed tax transparency standards, and disclosed that defensive measures will be considered.

“The aim is to overcome the obstacles that jurisdictions face in trying to tax the profits that multinational companies earn from users and consumers located in those jurisdictions, particularly where the companies are not physically present in those markets,” the OECD said in an update report to the G20 finance ministers.

Prior to the G20, Chancellor of the Exchequer Philip Hammond said that an international agreement would be the best solution to ensure that digital platform businesses that generate substantial value in the UK pay their fair share of tax.

"Britain’s future outside the EU depends on the strong partnerships we build with our friends and neighbours across the world," Chancellor Hammond said.

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