G7 countries support the international taxation of large international companies, a senior US official expects. A deal could already be finalized this Friday. One of its purposes is to prevent companies from turning their profits into taxes.
Deputy Finance Minister Wally Adeo told Reuters on Monday that he considered the US proposal to introduce a global tax rate of 15 tax cases to have “strong support” among the G7’s major industrialized nations. This is the minimum rate.
Further Financial Times G7 asks those involved if it is close to a deal. Such an agreement between Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the European Union would pave the way for new rules on taxation for large corporations. They now regularly shift profits and expenses across national borders in order to pay as little as possible.
Negotiations between the G7 countries have taken place in recent days. This Friday their finance ministers will meet via their webcams. When they come out, this is essentially a strong signal for another conference round: OECD. The club’s 139 countries are meeting on a new tax system. The biggest tax change for companies in a century should come. The US government wants the influential G7 to come to OECD with a definite plan. Negotiators at the OECD are aiming for a deal based on policy over the summer.
U.S. Deputy Secretary of State Adeomo said a final agreement could be reached when the G20 meets in Rome in October to prepare more details.
International income tax ranges from 21 percent to 15 percent
In April, the United States proposed a 21 percent international tax on the profits of large corporations. But last week, that percentage was revised to 15 percent to make it more attractive to other countries.
Multinational corporations are taxed on the basis of sales in a country, for example, not on the basis of head office location. This should ensure that all countries can benefit from the new tax rules. Joe Biden’s government must ensure that its plans are approved by its own Congress.
Finance Minister Janet Yellen says she wants to end the ‘race to the grassroots’ competition between countries with the lowest tax rates. He said in a speech two weeks ago that a better international tax system ensures innovation, growth and prosperity in all countries.
President Donald Trump actually reduced the corporate income tax from 35 to 21 percent. There are also countries that use the low profit tax as a competitive tool to attract businesses. The question is whether they will accept such a new tax system.
But a higher tax rate will not simply drive companies away, Yellen said earlier. Given the business environment of a country, it is also important that ‘governments have sufficient tax revenue to invest in public services and goods and be able to respond to a crisis’.
The United Kingdom is a bit cautious in the G7 countries. Prime Minister Boris Johnson has said taxing big technology companies like Google and Facebook is a priority. “A new tax deal is important to ensure that digital companies pay taxes in the UK in line with their economic activities in our country.”
Tax evasion costs the world 359 billion a year, with the Netherlands playing a key role
The Netherlands is the third largest contributor to the tax.