Amazon and Facebook, like other digital giants, to fall under Group of Seven global minimum corporate taxUS Treasury Secretary Janet Yellen said on Saturday. Asked if both companies would be covered by the proposal, Ms Yellen confirmed that the G7 deal will apply
large profitable companies, and these companies, I believe, will qualify by almost any definition.
Indeed, Europeans feared that companies like e-commerce giant Amazon would fall through the cracks, as its margins are lower than those of most of the other big names in digital giants.
G7 finance ministers, meeting in London, agreed on Saturday to support a global minimum corporate tax of at least 15% to deter multinationals from avoiding tax by hiding their profits in low-rate countries taxation. They also endorsed proposals to force the world’s largest companies, including US tech giants, to pay tax in countries where they have significant revenue without having a physical headquarters there.
UK Finance Minister Rishi Sunak, host of the meeting, said the deal would, among other things,
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.
Part of the deal provides, among other things, that countries such as France, which have imposed taxes on digital services, will remove them in favor of the global deal. The United States considers these unilateral digital taxes to be unfair trade measures that penalize large American technology companies such as Google, Amazon and Facebook.
Reactions from web giants
Facebook welcomed the reform project on Saturday, saying it accepted that this could also mean for the social network that it will be necessary to pay more taxes in different places. The American giant has also assured that it wants this international tax reform to succeed.
Google also said on Saturday that it strongly supports the work being done to update international tax rules.
We hope that countries will continue to work to ensure that a balanced and lasting agreement is finalized soon., said José Castañeda, spokesman for the American Internet giant, in a statement sent by email.
Amazon for its part encouraged the process initiated by theOECDOrganisation for Economic Co-operation and Development to create
a multilateral solution that will help stabilize international taxation.
We hope that discussions will continue with the G20, however, mentioned a spokesperson for the group.
With this agreement, the G7 countries want to put an end to tax competition which has led to a drastic drop in tax revenue from companies since the mid-1980s. A politically untenable situation at a time when the state coffers were emptied by the pandemic while conversely the digital giants have filled their pockets.
A disputed rate
If the reform was unanimously welcomed, the proposed rate is debated. For the non-governmental organization Oxfam, it was time for some of the world’s most powerful economies to force multinationals, including the tech and pharmaceutical giants, to pay their fair share of taxes, albeit a lower tax rate. at 15% seems largely insufficient.
A global minimum corporate tax rate of just $ 15 % is way too low. It will do little to end the dangerous race to the bottom on corporate taxes and the widespread use of tax havens.
According to the organization, it is particularly absurd for the G7 to claim that it
revises a failing global tax system by establishing a global minimum corporate tax that is
similar to reduced rates charged by tax havens like Ireland, Switzerland and Singapore.
We’re setting the bar so low that businesses can just break it, also wrote the organization in a press release.
The Association for the Taxation of Financial Transactions and for Citizen Action (ATTAC) speaks for its part of a missed opportunity, deeming the rate of 15% too low and the calculation base too vague.
Indeed, most of the G7 actors know that they will still have to rally the G20 countries and then the almost 140 countries working on the tax reform project in the bosom of theOECDOrganisation for Economic Co-operation and Development.
This journey should last several years. The challenge will be in particular to convince countries which have built their economies on particularly low corporate tax rates, such as Ireland (12.5%), which has thus attracted the European headquarters of many multinationals, often American, especially in the fields of technology and pharmacy.
The activity of these companies weighs very heavily on Irish GDP: it jumped 7.8% in the first quarter thanks to these companies, while without them it would have declined by 1% because of health restrictions.
Ireland’s Finance Minister Paschal Donohoe notably mentioned on Saturday that he was in
everyone’s interest in reaching a lasting, ambitious and fair agreement on the international tax architecture.
The European Union will have to find a way to push countries like Ireland to adopt a new economic model.