G7 finance chiefs discuss how to steer economies out of crisis

(Reuters) – Finance ministers and central bank heads from the Group of Seven (G7) industrialised nations discussed together on Friday how best to steer the world economy out of the coronavirus crisis, Britain’s finance ministry said.

Britain is this year’s host of the G7 meetings, and called on G7 countries to agree a joint approach to taxing internet giants by mid-2021, a deadline agreed by the wider Group of 20 nations.

“Ministers and central bank governors exchanged views on how best to shape and respond to the phases of the global recovery from COVID-19, including supporting workers and businesses in dealing with the pandemic while ensuring sustainability in the long term,” the British finance ministry said.

Italian Economy Minister Roberto Gualtieri said the G7 had committed to continuing coordinated action to support the economy. “The withdrawal of policy support is premature,” he wrote on Twitter..

Britain said the officials also agreed that making progress on reaching “an international solution to the tax challenges of the digital economy” was a key priority.

Countries have been trying to revive attempts at a global approach to taxing giant digital firms, many of them American such as Amazon and Google .

The issue has become a test case for Washington’s return to engagement with the rest of the world under new President Joe Biden.

Amazon criticised in paying lower rates than shops

Amazon has been criticised for paying less in business rates than British bricks and mortar retailers.

The online retail giant’s financial results revealed that UK sales for 2020 totalled $26.5bn (£19.3bn) – a 51% jump from $17.5bn in 2019.

Amazon’s overall business rates bill for 2020-2021 is estimated by researchers to be £71.5m – just 0.37% of its retail sales.

They say this is far lower than what the retail sector typically pays.

Amazon insists that it pays its tax and has created thousands of jobs in the UK.

Business rates are calculated by looking at a property’s rateable value and multiplying it by a tax rate set by the government. A new tax rate comes into effect at the start of each financial year on 1 April. 

According to figures from the Office for National Statistics (ONS), full-year retail sales at physical shops for the 12 months ending 31 December 2020 fell 10.3% from £318.5bn in 2019 to £285.8bn. 

Retail advisor Altus Group says that bricks and mortar retailers would have paid £8.25bn in business rates in 2020, had they not been given a tax holiday due to the pandemic.

It says the figure was calculated using rateable values, multiplied by the 2020 tax rate. The £8.25bn figure amounts to 2.9% of total retail sales, which is much higher than what Amazon pays. 

For instance, Arcadia – which owns Topshop, Burton and Dorothy Perkins – would have had to pay £91m in business rates on its 444 stores in 2020, had there not been a tax holiday, Altus Group says.

Topshop store
image captionWithout the business rates holiday, Arcadia Group would have paid £91m in taxes on its 444 stores in 2020, says Altus Group

A Treasury spokesman said: “We want to see thriving high streets, which is why we’ve spent tens of billions of pounds supporting shops throughout the pandemic and are supporting town centres through the changes online shopping brings. 

“Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax. We’re considering responses now.”

Separately, the Centre for Retail Research (CRR) calculated the business rates paid by physical shops in 2019 and found that they paid £7.17bn in business rates, or 2.3% of their total retail sales in 2019.

The two organisations said that Amazon, which has close to 100 sites in the UK, including distribution warehouses and lockers on High Streets, is not paying enough tax. 

However, their calculations do not include corporation tax, which is currently at 19% of profits. 

Debate over digital services tax

Amazon would not comment on the calculations made by Altus Group and CRR. 

A spokesman for Amazon said: “We’ve invested more than £23bn in jobs and infrastructure in the UK since 2010. 

“Last year we created 10,000 new jobs and last week we announced 1,000 new apprenticeships. This continued investment helped contribute to a total tax contribution of £1.1bn during 2019 – £293m in direct taxes and £854m in indirect taxes.”

The government is currently reviewing the way in which the business rates system works, and is also separately considering a 2% tax on online sales and services. 

But business lobby group the Confederation of British Industry (CBI) has warned that any tax rises would place additional pressure on businesses that are already struggling due to the pandemic.

EU claims court errors in bid to overturn $15.7 billion Apple tax judgment

EU antitrust enforcers have claimed a court made legal errors when it scrapped their order for iPhone maker Apple to pay 13 billion euros ($15.7 billion) in Irish back taxes, in a filing to have the verdict overturned.

The stakes are high for the European Commission in its crackdown against what it sees as aggressive tax planning by multinationals.

It has a mixed record to date, winning court backing in its case against Fiat Chrysler but losing in the Starbucks and Belgian tax break cases.

The Commission is appealing to the Luxembourg-based Court of Justice of the European Union following a ruling last year by the General Court, which said the EU executive had not met the requisite legal standard to show Apple had enjoyed an unfair advantage.

In its 2016 finding the Commission said two Irish tax rulings had artificially reduced Apple’s tax burden for over two decades, which in 2014 was as low as 0.005%.

“The General Court’s failure to properly consider the structure and content of the decision and the explanations in the Commission’s written submissions on the functions performed by the head offices and the Irish branches is a breach of procedure,” the Commission said in a filing in the Official Journal,

The EU competition enforcer added: “The General Court’s subsequent acknowledgement… that the decision examines the functions performed by the Irish branches in justifying the attribution of the Apple IP licences to them constitutes contradictory reasoning, which amounts to a failure to state reasons.”

Apple has said the General Court judgment proved it has always complied with Irish laws, with the issue more about where it should pay taxes rather than the amount.

The CJEU will hold a hearing on the case in the coming months. The case is C-465/20 P Commission v Ireland and Others.