Today, the finance ministers and the governors of the central banks of the G7 (Germany, Canada, the United States, France, Italy, Japan, and the United Kingdom) reached a consensus to approve the so-called “digital tax”. This will force large technology companies that have digital operations to pay taxes in those countries where they are active, regardless of whether they are not physically present.
The French Finance Minister, Bruno Le Maire, released the details of this new law that will tax the digital activities of the so-called “technology giants”, such as Google, Amazon, Facebook or Apple, for the accumulated income within a country, even if its headquarters are in another place. This measure was denounced by the United States as “discriminatory”, since, they claim, it mainly affects US companies.
The agreement also stated that there should be a minimum level of tax payment in each country, which would seek to prevent a country from attracting digital multinational businesses by taxing less and becoming more attractive. This “minimum tax” was not closed at this meeting and will be analyzed later.
According to Le Maire, the goal of this new “digital tax” is to end aggressive tax competition between countries, and thus prevent certain companies from finding ways to avoid paying taxes.
This decision is made after France approved a 3% tax on large technology companies, which caused the discontent of the United States and an investigation, which led to the threat of imposing new tariffs on French products.
Le Maire said that France will keep its tax until the new internationally agreed digital tax replaces it, which is estimated to occur in 2020, when an international agreement is sought at the next G20 meeting that would be overseen by the Organization for Cooperation and Economic Development (OECD).
Serious concerns against Libra
On the other hand, during this G7 meeting “serious regulatory and systemic concerns” were raised against Libra, the new currency that Facebook prepares with the support of several companies. Le Maire mentioned that these types of initiatives must “be regulated as strictly as possible” to ensure that they do not affect the global financial system.
To make it clear, the G7 opposes the idea that companies may have the same level of privilege as countries in the creation of means of payment, since, they say, they would not have the control and obligations that this entails. “We cannot accept that private companies issue their own currencies without democratic control,” said Le Maire.
Some of the concerns revolve around the fact that a digital currency, powered by Facebook, can weaken government control over monetary and banking policies, as well as pose security risks. For example, they claim that Libra could be used in money laundering, terrorist financing and other practices that are now part of the “public policy priorities.”
Jens Weidmann, president of the Deutsche Bundesbank and member of the Governing Council of the European Central Bank, mentioned:
“Today the process of international regulation of the stablecoins has begun, it is not a question of rethinking innovative concepts, we are open to technological developments and the stablecoins offer opportunities for economic prosperity.” So there is no reason to be alarmed, but to be alert.”