What’s Going On Here?The world’s seven leading developed nations agreed to raise taxes on multinational companies over the weekend, and even Big Tech might struggle to escape this one… What Does This Mean?After plenty of discussion, the G7 agreed on a new deal that calls for a tax rate of at least 15% on multinationals. More importantly, it’ll tax them in the countries where they actually make money, not just where they’re headquartered (tweet this). That’ll help stop companies evading billions in tax by moving profits to places with favorable policies. We’re looking at you, Ireland.
But before you get too excited about sticking it to the untouchables, it’s worth pointing out that this deal has a long way to go. It still needs to be approved by the G20 next month, as well as by the 139 countries involved in talks with another major economic organization, the OECD. Why Should I Care?For markets: This is Big Tech’s big tax.
Major tech companies make money in multiple countries, but they’ve only ever had to pay taxes where they’re based – a contradiction Britain, France, and Italy have tried to resolve with their own digital services taxes. But this deal will see the 15% tax rate applied to all profits, including those the multinationals make from online sources. So that inevitably means higher tax bills and lower profits for the likes of Amazon, Google-parent Alphabet, and Facebook.
Zooming in: Alphabet’s got fine written all over it.
It’s not a great start to the week for Alphabet, which was just hit with a $267 million fine by France for abusing its dominance in the online advertising market. The tech giant quickly agreed to pay the fine, and promised it’d change the way its online ads business works around the world. Of course, that fine was probably pocket change compared to the money the rule-break brought in, which might be why the news came and went without a hiccup in Alphabet’s share price. | 