“A colossal step”, “Historic day” : less than a month after the G7, and after years of negotiations, 130 countries, but not Ireland, agreed on Thursday July 1 to better tax multinationals, in particular with a minimum tax rate on companies “At least 15%”.
“After years of intense work and negotiations, this historic package of measures will ensure that large multinational corporations pay their fair share of taxes all over the world.”, said Mathias Cormann, the secretary general of the Organization for Development and Economic Cooperation (OECD) which is leading these negotiations, quoted in a press release.
A small group of countries, including Ireland and Hungary, very reluctant to the proposed agreement that was being negotiated, especially on a minimum rate of 15%, did not sign the declaration reached today, according to the list. provided by the Organization.
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The Irish government, through the voice of its Minister of Finance Paschal Donohoe, however affirmed “Support overall” this agreement and claimed to have “For the purpose of finding a way out that Ireland can still support”.
China, whose position was eagerly awaited, and countries generally considered to be tax havens joined the agreement.
All the signatory countries represent 90% of world GDP.
“A historic day”
“Multinational corporations will no longer be able to pit countries against each other in order to lower tax rates and protect their profits at the expense of public revenues”, reacted US President Joe Biden in a statement. These companies “Will no longer be able to avoid paying their fair share by hiding the profits generated in the United States, or any other country, in lower tax jurisdictions”.
His Treasury Secretary Janet Yellen praised “A historic day for economic diplomacy”.
German Finance Minister Olaf Scholz spoke of a “Not colossal towards greater tax justice” and his French counterpart Bruno Le Maire “The most important international tax agreement concluded in a century”.
If the agreement puts under pressure the model of the most aggressive tax havens, it should mainly benefit rich countries, qualified the NGO Oxfam.
“Rich countries are forcing developing countries to choose between a disadvantageous deal and no deal”, she lambasted in a press release, denouncing a “New form of economic colonialism”.
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The joint declaration, which is based on an agreement reached at the G7 in early June, also provides for the distribution of “Fairer” the benefits between the countries where the company headquarters are located and those where they actually carry out their activity, even without a physical presence. This component targets in particular the digital giants.
Extractive industries, such as mining for example, and regulated financial services will however be excluded from this component, but not from the minimum tax, specifies the text.
“A precious aid to States”
The professional federation of digital industries (CCIA), including in particular Amazon or Facebook, said “Look forward to participating in the details of the implementation plan and urges countries to remove existing digital service taxes and waive” to other similar projects under study, through its chairman Matt Schruers.
The proposed device will be “Of invaluable aid to States” who spent a lot during the pandemic and must finance the recovery, said the OECD in its press release.
“This package of measures does not put an end to tax competition, and is not intended to do so, but seeks to limit it according to rules agreed at the multilateral level”, insisted Mathias Cormann.
Implementation in 2023
The participants in the negotiations have given themselves until October to “Complete the technical work” and to prepare “An effective implementation plan in 2023”. Until then, countries that have not joined the agreement can still join it.
“I expect that to happen, that the political dynamics will lead us there. […] Ireland, as a member of the Union [européenne], cannot hold this position for long, it is not possible ”, estimated a source at the German Ministry of Finance.
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The G20 finance ministers, who are meeting next week in Venice, should endorse the technical and political progress made on Thursday. A first agreement at the G7 at the beginning of June in London had given new impetus to the negotiations, bogged down during the presidency of Donald Trump and revived by the arrival of Joe Biden at the White House.
The health crisis, which has seen states spend heavily to deal with the pandemic and support their economies, has also strengthened the political will to reach an agreement that is supposed to increase tax revenue. According to the OECD, at a rate of at least 15%, the global minimum tax is expected to generate around $ 150 billion in additional tax revenue per year globally.