Digital

Digital tax. On July 10, the G20 Finance Ministers approved the agreement to establish a tax rate for companies in the global digital sector. On the occasion, the representatives of the member countries subscribed to the imposition of the global minimum tax of 15%, after being endorsed at the G7 meeting and subscribed by the Inclusive Framework Group of the Organization for Economic Cooperation and Development (OECD). Mexico and Argentina have indicated their interest in advancing the application of the tax at the local level. The tax is expected to be discussed by the OECD in October 2021 and to start being implemented in 2023. At the same time, it is expected that the tax will serve as a precedent for Latin American countries that are not members of the OECD or G20 to promote tax measures along the same lines.

The agreement endorsed by the G20 aims to prevent tax evasion by digital companies such as Facebook, Google and Amazon, based on two pillars. The first proposes to ensure a fairer distribution of tax rights between countries with respect to multinational companies, including digital ones. This would involve reallocating the duties on these companies from their countries of origin to the markets in which they do business, regardless of whether or not they have a physical presence there. Likewise, the second pillar aims to establish a minimum basis for tax competition between countries in terms of corporate income taxes, imposing a global minimum tax of at least 15% as the tax base.

In view of the agreement, Mexico and Argentina have already declared their intention to move forward with the prompt implementation of the agreement. In the case of Mexico, the president of the ruling party of the Political Coordination Board (Jucopo in Spanish) of the Senate, Ricardo Monreal, declared that the legislative branch “is ready to comply with the agreement to achieve better tax justice”, accompanying the statement of the former Secretary of Finance Arturo Herrera who indicated that the tax could be included in the federal budget for 2022. For his part, Argentina’s Minister of Economy, Martin Guzman, considered that taxing multinational corporations is a “necessity” at the national level, claiming that funds are needed to finance economic and social development objectives in the country.

The digital tax pact was agreed to by 130 countries, including Costa Rica, Uruguay, Chile and Colombia, among others, and jurisdictions from the 139 that are part of the OECD’s Inclusive Framework, and the organization has extended its willingness for countries that have not yet signed up to the agreement to support the measure in the medium term.

Next steps

Finance ministers of G20 member countries have approved establishing a 15% tax rate on multinational companies, which include those in the digital sector. Both from Argentina and Mexico, high-level officials have declared their willingness to move forward in terms of applying the levy in their own countries in the medium term. It is also expected that some of the countries in the region within the OECD’s Inclusive Framework that have voted in favor of the tax, such as Brazil, Costa Rica and Colombia, will declare their intention to implement it locally.