The global deal aims to deter multinational companies from avoiding taxes. Photo / AP

The Group of Seven Wealthy Democracies has agreed to support a minimum global corporate tax of at least 15 percent to deter multinational companies from avoiding tax by hiding their profits in low-rate countries.

G-7 finance ministers meeting in London also endorsed proposals to force the world’s biggest companies – including US-based tech giants – to pay taxes in countries where they have a lot of money. sales but no physical headquarters.

UK Treasury Chief Rishi Sunak, the host, said the deal “would reform the global tax system to adapt it to the global digital age and most importantly to ensure that it is fair, so that the right companies pay the right taxes in the right places. “

US Treasury Secretary Janet Yellen said the deal “provides tremendous momentum” to reach a global deal that “would end the race to the bottom in corporate taxation and ensure fairness for the middle class and workers in the United States and around the world. “

Nations have grappled for years with the question of how to dissuade companies from legally avoiding paying taxes by using accounting and legal schemes to cede their profits to subsidiaries in tax havens – usually small countries that attract companies with low or no taxes, even if the companies do very little business there.

International discussions on tax issues gained momentum after US President Joe Biden backed the idea of ​​a global minimum of at least 15 percent – and possibly more – on corporate profits. companies.

G7 Finance Ministers at Lancaster House in London.  Photo / AP
G7 Finance Ministers at Lancaster House in London. Photo / AP

The finance ministers ‘meeting preceded the annual G7 leaders’ summit scheduled for June 11-13 in Cornwall, England. The G7 endorsement could help build momentum for an agreement in broader talks between more than 135 countries to be held in Paris as well as a meeting of the Group of 20 finance ministers in Venice in July.

Manal Corwin, tax director at professional services firm KPMG and a former head of the Treasury Department, said the meeting clarified the position of major countries on several key issues, including the 15% minimum.

“Signaling that there is a consensus around some of the key features of what is being discussed globally was really, really important so that they had the momentum to move to the next phase with the G20,” said she declared.

Approved Tax Proposals have two main parts. The first part allows countries to tax a share of the profits made by companies that do not have a physical presence but have substantial sales, for example by selling digital advertising.

France had launched the debate on the issue by imposing its own tax on digital services on revenues it considered to have been collected in France by companies such as Google, Amazon and Facebook. Other countries have followed suit. The United States views these national taxes as unfair trade measures that unduly target American businesses.

Part of the deal is that other countries would repeal their unilateral digital taxes in favor of a global deal.

G7 finance ministers meet at Lancaster House in London.  Photo / AP
G7 finance ministers meet at Lancaster House in London. Photo / AP

Facebook vice president of global affairs Nick Clegg said the deal was a big step towards increasing business certainty and public confidence in the global tax system, but acknowledged that it could cost money. dear to the company.

“We want the international tax reform process to be successful and recognize that this could mean Facebook is paying more taxes, and in different places,” Clegg said on Twitter.

The G7 statement echoes a US proposal to let countries tax a portion of the profits of “the largest and most profitable multinational companies – digital or not – if they do business within their borders.” He supported granting countries the right to tax 20 percent or more of local profits above a 10 percent profit margin.

Yellen, who asked her if she had given her European counterparts assurances that large American technology companies would be included, said the deal “will include large profitable companies, and I think those companies will be qualified by almost all. the definitions”.

The other main part of the proposal is that countries tax the overseas profits of their home companies at a rate of at least 15 percent. This would discourage the practice of using accounting schemes to shift profits to a few countries with very low tax rates, as income not taxed abroad would be subject to additional tax in the headquarters country.

At home, Biden is proposing a US tax rate of 21% on corporate profits abroad, an increase from the 10.5 to 13.125% adopted under former President Donald Trump.

President Joe Biden is raising the corporate tax rate in the United States.  Photo / AP
President Joe Biden is raising the corporate tax rate in the United States. Photo / AP

Even if the US rate were to exceed the global minimum, the difference would be small enough to eliminate most opportunities for tax evasion. Biden’s proposal requires congressional approval.

KPMG’s Corwin said the final statement was silent on several key points, including exactly which of the “biggest and most profitable” multinationals would be covered by the proposal and how companies would be protected against double billing if countries did not. disagree on who has the right to tax them.

These complexities are fueling the G20 talks and the ongoing Organization for Economic Co-operation and Development talks in Paris.

“The devil is in the details,” Corwin said.

The Group of 7 is an informal forum between Canada, France, Germany, Italy, Japan, United Kingdom and United States.

Representatives of the European Union also participate. Its decisions are not legally binding, but leaders can use the forum to exert political influence.

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Source: www.nzherald.co.nz
This notice was published: 2021-06-05 21:04:24

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