Global tax deal draws closer as G-7 seeks common ground | Economy

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 were to meet virtually on Friday and in person next week, can find sufficient common ground, this could pave the way for a broader consensus within the Group of 20, thus laying the groundwork for the global agreement which is in the sights of negotiators.

“We are in the final phase of reaching an agreement,” German Finance Minister Olaf Scholz said on Wednesday at a virtual press conference with his French counterpart Bruno Le Maire. “It hasn’t been done yet but looks like we’ll be there very soon.”

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 is perhaps the most controversial issue in the discussions.

Convincing low-tax jurisdictions such as 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 ground has changed the most in recent days, after the Biden administration last week announced a global tax floor of at least 15%, lower than the proposed 21% rate for profits. overseas US companies – a level countries, including the UK, considered too high.

Although European countries warmly welcomed the offer, they insisted that the United States 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.

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 .

Asked about this specific Amazon case on Wednesday, Le Maire said resolving the issue was one of three conditions set by France, while ensuring that the entire package is coupled with a minimum tax deal. and that the rate of the levy is credible.

“When I say all significant digital businesses, it means all significant digital businesses,” said Le Maire. “Our assessment is that we are not far from having these three conditions met today, which means that we are not far from having an agreement for the next G-7.”

An agreement within that group would mean support for the development of a broader agreement at the July meeting of the G-20, which handled talks on international taxation. The plans will still have to find an agreement within the framework of the OECD.

“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,” Scholz said on Tuesday. in a Bloomberg webinar. “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 to engage in OECD-led discussions to agree on an approach globally consistent in the face of the fiscal 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.

A proposal from the US Treasury Department, which was circulated to other governments in April and was seen by Bloomberg, would subject around 100 of the “biggest and most profitable” companies to higher taxation in countries where it is located. find business users and consumers 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 declined to be named due to departmental policy, expects progress from next week’s G-7 meeting to contribute to a broader G-20 agreement.

About Norma Wade

Check Also

liwwa raises $18.5m in pre-Series B

Fintech based in Jordan Liwwa closed an $18.5 million pre-Series B equity and debt round. …

Leave a Reply

Your email address will not be published.