LONDON (Reuters) – Wealthy Group of Seven countries on Saturday will seek to overcome long-standing differences and strike a landmark deal to close the net on big companies they say do not pay enough taxes.
The proposed deal, which could form the basis of a global compact next month, aims to end a decades-long “race to the bottom” in which countries have clashed to attract giant companies with very low tax rates and exemptions.
This in turn has cost their public coffers hundreds of billions of dollars – a shortfall that they now need to recoup all the more urgently to pay the enormous cost of supporting economies ravaged by the coronavirus crisis.
“We are only a millimeter away from a historic deal,” French Finance Minister Bruno Le Maire told the BBC on Friday as he and other G7 finance chiefs met in person for the first time since the start of the pandemic during talks in London.
UK Finance Minister Rishi Sunak, who is chairing the talks, also wants large companies to be required to report their environmental impact consistently. The G7 should also commit to avoiding withdrawing COVID stimulus too soon.
Rich countries have struggled for years to agree on a way to generate more revenue from large multinationals such as Google, Amazon and Facebook, which often record profits in jurisdictions where they pay little or no tax.
The administration of US President Joe Biden has given new impetus to the stalled talks by proposing a minimum global corporate tax rate of 15%, higher than the level of countries like Ireland but lower than the lowest level in the G7.
Yet major disagreements remain both over the minimum rate at which companies should be taxed and how the rules will be crafted to ensure that very large companies with lower profit margins, like Amazon, face taxes. higher.
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One question is whether 15% should be the final rate or whether it should be seen as the floor for a final deal, leaving the possibility of agreeing to a higher level in subsequent negotiations within the larger group of G20 country scheduled for Venice in July.
Beyond the level itself, just as important to Britain and many others, large multinationals pay more tax where they make their sales – not just where they make a profit or set up their headquarters. social.
“Their economic model gives them the chance to avoid 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 it sees as unfairly targeting American tech giants for tax practices that European companies also use.
âIt’s going to go straight to the point,â a source close to the talks said. âThe United States maintains its position, as do we. “
British, Italian and Spanish fashion, cosmetics and luxury goods exports to the United States will be among those facing new tariffs of 25% later this year if there is no compromise .
The United States has proposed to levy 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 have lower profit margins than other tech companies – don’t escape the net.
Written by Mark John; Editing by Alexander Smith