Global tax deal nears first step as G-7 seeks common ground

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A global deal that could reshape the tax landscape for the biggest corporations is approaching a crucial first step as the Group of Seven nations focus on a deal that could feature both a minimum rate and encompass digital giants.

If the finance ministers who are due to meet virtually on Friday and in person next week can find sufficient common ground, this could pave the way for the formation of a broader consensus within the Group of 20, thus throwing out the bases of the global agreement which is in the sights of the negotiators. .

Global tax

US initiative for the OECD could reshape the business landscape

Source: Organization for Economic Co-operation and Development

“It is absolutely promising that we will have a solution very soon, and I expect that to happen this summer,” German Finance Minister Olaf Scholz said in a Bloomberg webinar on Tuesday. “So is the question of how we could better tax the big global companies, especially those in the digital sector, the global digital platforms. There are new proposals on the table and I am quite optimistic. “

European governments are increasingly confident in an initial deal within the G-7, people familiar with the matter say, while Japan also anticipates progress, a finance ministry official said.

The insistence of countries including France on the need for a mechanism to collect taxes from digital companies such as Amazon.com Inc. is perhaps the most controversial issue in the discussions.

Convincing low-tax jurisdictions like Ireland to agree on a minimum rate will also be a challenge for a final deal being negotiated between 139 countries in the Organization for Economic Co-operation and Development.

This is the area where the terrain has changed the most in recent days, following President Joe Biden’s administration last week. launched a global tax floor of at least 15%, lower than the 21% rate it proposed for overseas profits of US companies – a level that countries, including the UK, deem too high.

Taxation schedule

Possible moments on the way to a global deal on multinational revenues
  • May 28: G-7 finance ministers to meet by phone
  • June 4 and 5: G-7 finance ministers meet in London
  • June 11-13: G-7 leaders meet in Cornwall
  • July 9-10: G-20 finance ministers meet in Venice
  • October: possible global agreement, depending on OECD official

While the European nations Welcomed the offer, they called on the United States to focus on measures to ensure that big tech companies pay more of their taxes in the countries where they operate. U.S. officials have opposed efforts to target specific industries for taxation.

Britain’s Sunak isn’t convinced of Biden’s global corporate tax plan

European governments see deal approaching as talks progress to meet their demand to ensure all digital businesses are covered by new rules, according to people, who spoke on condition of anonymity because talks are underway .

A G-7 deal would mean support for crafting a broader deal at the July meeting of the G-20, which handled discussions on international taxation. The plans will still have to find an agreement within the framework of the OECD.

End of Game

“There is the working situation that we have in the inclusive framework around the OECD, there will be a report to the G-20 and we are still discussing this issue also at the G-7 level,” said Scholz. “If I see it correctly, it looks like now we are going to the end of this game and we will get a solution.”

Australian Treasurer Josh Frydenberg, in an email, said his country “welcomes the United States“Commitment to continue participating in the discussions led by the OECD with a view to agreeing a globally coherent approach to the tax challenges posed by the digitization of the economy.”

Australia, although not a member of the G-7, is one of the vice-chairs of the OECD Steering Group of the Inclusive Framework for Base Erosion and Profit Shifting .

The OECD effort aims to replace taxes on digital services that a growing number of countries are adopting. Countries have been particularly upset about how to ensure they get a share of the taxes on Amazon, which has unusual status as a low-margin tech giant.

Read more: Amazon’s taxation becomes a sticking point in discussions over global levies

A proposal from the US Treasury Department, which was circulated to other governments in April and was seen by Bloomberg, would subject a hundred of the “biggest and most profitable” companies to higher taxation in the countries where the users and consumers of the companies are located, as opposed to the countries where they are headquartered.

He did not call for specific numbers, but the revenue and breakeven thresholds would have to be set high to capture only 100 companies.

Japan supports this American initiative and considers that the proposed minimum rate of 15% advances the negotiations, according to an official of the Ministry of Finance. The person who refused to be appointed due to ministry policy, expects progress at next week’s G-7 meeting to contribute to a broader G-20 agreement.

– With help from Isabel Gottlieb, Laura Davison, Saleha Mohsin, Jason Scott, Jason Clenfield and Stephanie Flanders




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