Finance ministers from the G7 group of rich countries will meet in London on Friday for two days of talks aimed at moving closer to a global deal to raise taxes on Google, Facebook and Amazon.
The rally, chaired by UK Finance Minister Rishi Sunak, will be the first time the seven ministers have met face to face since the start of the coronavirus pandemic.
The desire of US President Joe Biden to raise taxes on large corporations also creates more chances of international consensus than under his predecessor Donald Trump.
“I am extremely optimistic about achieving concrete results this weekend,” Sunak said in a statement released Thursday evening.
Sunak stressed the importance for his fellow ministers from the United States, Japan, Germany, France, Italy and Canada to be able to meet face to face at Lancaster House, an ornate 19th-century mansion almost in next to Buckingham Palace.
“You have to be around a table, talking openly and frankly about things,” Sunak told Reuters in an interview this week. Read more .
Due to COVID restrictions, ministerial delegations have been reduced and there are few traveling journalists. The seating plans have been redesigned with the help of public health officials.
But the biggest challenge remains to reach an agreement on tax reform which could then be presented to a larger group of countries, the G20, at a summit in Venice in July.
French Finance Minister Bruno Le Maire said ahead of the meeting that a deal would be a “decisive step” he believed was “within reach”.
However, Japanese Finance Minister Taro Aso said on Monday that he did not expect an agreement this week on a specific minimum tax rate. Read more
The US Treasury expects a fuller deal when Biden and other government leaders meet at a remote seaside resort in southwest England from June 11-13. Read more
MINIMUM RATE 15%
The United States has proposed a minimum overall corporate tax rate of at least 15%. If a business paid taxes somewhere at a lower rate, it would likely have to pay additional taxes.
But just as important to Britain and many other countries, companies pay more tax where they make their sales, not just where they make a profit or set up their headquarters.
The United States wants to end taxes on digital services that Britain, France and Italy have collected, and which it sees unfairly targeting American tech giants for tax practices that European companies also use.
British, Italian and Spanish fashion 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. Read more
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 approach but want to make sure that companies like Amazon – which has lower profit margins than other tech companies – don’t escape the net.
“All, and without exception,” must be covered by the new rules, German Finance Minister Olaf Scholz told Reuters. Read more
Daniel Bunn, a global tax expert at the Washington Tax Foundation think tank, said it would likely lead to more complex regulation.
“A lot of these rules will, I think, be based on political principles rather than principles,” he said.
Some large companies could even be incentivized to acquire less profitable subsidiaries to reduce their overall profit margin and dodge the new tax, he added.
Climate change is the other main item on the agenda. Britain is hosting the UN COP climate summit in Glasgow in November and wants countries to force companies to report their environmental impact consistently, to make it easier for investors to support green projects.
British companies will have to follow an environmental reporting model defined by the Financial Stability Board, a global regulator, from 2022. French companies have followed similar national guidelines since 2016.
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