UK Chancellor of the Exchequer Rishi Sunak (center), US Secretary of the Treasury Janet Yellen (right) attend the first day of the G-7 finance ministers’ meeting at London’s Lancaster House on June 4, 2021.
Stefan Rousseau | AFP | Getty Images
The Group of Seven Rich Countries will attempt to overcome long-standing differences on Saturday and strike a landmark agreement to close the grid on major corporations they say aren’t paying enough taxes.
The proposed deal, which could form the basis for a global pact next month, aims to end a decades-long “race to the bottom” in which countries have competed to attract large corporations with ultra-low tax rates and exemptions. .
That, in turn, has cost their public treasury hundreds of billions of dollars — a shortfall they now all the more urgently need to recoup to pay the huge cost of supporting economies devastated by the coronavirus crisis.
“We are just one millimeter from a historic agreement,” French Finance Minister Bruno Le Maire told the BBC on Friday when he and other G-7 financial leaders met face-to-face for the first time since the pandemic began. discussions in London.
British Chancellor of the Exchequer Rishi Sunak, who is chairing the talks, also wants large companies to consistently report on their environmental impact. The G-7 is likely to work to prevent the Covid stimulus from being withdrawn too early.
Rich countries have struggled for years to agree on a way to generate more revenue from large multinational corporations such as Google, Amazon and Facebook, which often make profits in jurisdictions where they pay little or no tax.
The administration of US President Joe Biden has given new impetus to stalled talks by proposing a minimum global corporate tax rate of 15%, above the level in countries like Ireland but below the lowest level in the G-7.
Still, major disagreements remain over both the minimum rate at which companies should be taxed, and how the rules will be designed to ensure that very large companies with lower profit margins, such as Amazon, have to pay higher taxes.
to the wire
One question is whether 15% should be the final percentage or whether it should be considered the bottom for a final deal, leaving room to agree on a higher level during the next discussions within the wider G20 group of countries which are scheduled for July in Venice.
Beyond the level itself, equally important to Britain and many others, large multinationals pay more tax where they make their turnover – not just where they make a profit or have their headquarters.
“Their business model gives them opportunities to evade taxes…much more than other companies,” said German Finance Minister Olaf Scholz.
The United States is also calling for an immediate end to taxes on digital services levied by Britain, France and Italy, which they believe are unfairly targeting US tech giants for tax practices that European companies also use.
“It goes straight to the wire,” said a source close to the talks. “The United States is sticking to its position, as are we.”
British, Italian and Spanish exports of fashion, cosmetics and luxury goods to the United States will face new 25% tariffs later this year if no compromise is reached.
The US has proposed to impose the new global minimum tax only on the 100 largest and most profitable companies in the world.
Britain, Germany and France are open to this, but want to make sure that companies like Amazon – which has lower profit margins than other tech companies – don’t escape the net.