British Chancellor of the Exchequer Rishi Sunak (center), US Treasury Secretary Janet Yellen (right) attends the first day of the G-7 Finance Ministers’ Meeting on June 4, 2021 at Lancaster House in London.
Stefan Rousseau | AFP | Getty Images
The group of seven rich nations will attempt on Saturday to bridge long-standing differences and strike a groundbreaking deal to shut the net to large corporations that they believe are not paying enough taxes.
The proposed deal, which could form the basis of a global pact next month, aims to end a decade-long “race to the bottom” as countries compete to attract corporate giants with ultra-low tax rates and exemptions.
That, in turn, cost their public coffers hundreds of billions of dollars – a gap that they now need to fill all the more urgently in order to pay the enormous cost of propping up economies hit by the coronavirus crisis.
“We are only a millimeter away from an historic agreement,” French Finance Minister Bruno Le Maire told the BBC on Friday when he and other G-7 finance chiefs met in London for the first time since the pandemic began.
The British Treasury Secretary Rishi Sunak, who is leading the talks, also wants large companies to be obliged to declare their environmental impacts uniformly. The G-7 will likely undertake not to withdraw the Covid stimulus too early either.
Rich nations have struggled for years to agree on a way to get more revenue from large multinationals like Google, Amazon, and Facebook, which often make profits in jurisdictions where they pay little or no taxes.
The administration of US President Joe Biden has re-energized the stalled talks by proposing a minimum global tax rate of 15%, above the level in countries like Ireland but below the lowest level in the G-7.
Still, major disagreements remain on both the minimum rate at which businesses should be taxed and how the rules should be put in place to ensure that very large companies with lower profit margins, like Amazon, face higher taxes.
To the wire
One question is whether 15% should be the final rate, or whether it should be seen as the lower limit for a final agreement to allow room for maneuver in subsequent talks within the broader G20 group of countries planned in Venice in July. to agree on a higher level.
Beyond that, it is equally important for the UK and many others that large multinational corporations pay more taxes where they do business – not just where they make profits or move their headquarters.
“Their business model offers them opportunities to avoid taxes … much more than other companies,” said Federal Finance Minister Olaf Scholz.
The United States is also waiting for an immediate end to UK, France and Italy taxes on digital services, which it believes are targeting US tech giants over tax practices that European companies also employ.
“It will go straight to the wire,” said a source close to the talks. “The United States holds its position, as do we.”
British, Italian and Spanish fashion, cosmetics and luxury goods exports to the United States will be among the new 25-inch tariffs later this year, if there is no compromise.
The US has proposed that the new global minimum tax only be imposed on the world’s 100 largest and most profitable companies.
The UK, Germany and France are open to this, but want to make sure companies like Amazon – which has lower profit margins than other tech companies – don’t escape the net.