The world’s top economies are set to sign an agreement that would see the largest technology firms taxed based on where they generate revenue, rather than where they are headquartered.
The news has been published by various publications, including the Institute of Chartered Accountants in England and Wales’ (ICAEW) Economia magazine.
According to reports, finance ministers of the G20 – the international consortium of the top 20 economies (accounting for 90 per cent of gross world product) – are “likely” to sign a “basic version” of the digital tax policy when they meet in Japan later this month.
Economia reports that the new policy will see digital giants, such as Amazon, Google and Apple, taxed on their “business footprint”, rather than the “current system of taxing according to headquarter location”.
Experts suggest that the new rules could collect as much as £240 billion in tax on “missing” profits, which are usually rerouted through low-tax jurisdictions.
The move follows the Chancellor Philip Hammond’s recent announcement to clamp down on digital giants who move profits out of the UK to avoid paying tax.
In his most recent Spring Statement, the Treasury chief said he would look at implementing a new two per cent digital tax aimed at global organisations with a turnover in excess of £500 million. Mr Hammond said the tax – expected to come into effect from April 2020 – would generate £440 million in three years.
“This will be a narrowly targeted tax on the UK generated revenues of specific digital platform business models,” said Mr Hammond earlier this year.
He added: “In the meantime we will continue to work at the OECD and G20 to seek a globally agreed solution and if one emerges, we will consider adopting it in place of the UK digital services tax.”