Members of the Group of Seven of the world’s most developed nations agreed on Saturday to introduce a minimum corporate income tax of 15 percent. Reuters reported. The goal of the agreement is to discourage multinational companies from moving their headquarters to countries with lower tax levels.
British Finance Minister Rishi Sunak and German Finance Minister Olaf Schulz said it was a historic move. “This is good news for tax justice and solidarity and bad news for tax havens around the world,” Schultz said. He added that “the next step will be to discuss the G7 agreement with a number of partners in the Organization for Economic Cooperation and Development (OECD) and in the G20.”
French Finance Minister Bruno Le Maire has called a global corporate income tax of at least 15 per cent a “stepping stone” and promised to fight for another increase. “It’s a starting point and in the coming months we will try to ensure that this tax is as high as possible,” Le Maire wrote on Twitter.
we are here !
After 4 years of fighting, a historic agreement was reached with the G7 member states on minimum taxes for companies and digital giants.
France can be proud! pic.twitter.com/eIMqjweyjl
– Bruno Le Maire June 5, 2021
Rich countries have tried for years to improve tax collection from multinational corporations and big tech companies like Facebook and Google, to no avail. The current agreement was reached in London during a meeting of finance ministers from the Group of Seven, which includes the United States, Canada, Japan, Britain, Germany, Italy and France.
The issue of taxation of multinational corporations is an important topic in today’s global economy, companies – this is particularly well known in the case of the large Internet or IT industries in general – often tax their profits in countries with low or even no corporate income. tax. In Europe, multinational corporations and major technology companies are based in, for example, Ireland, Luxembourg or the Netherlands.
They collect huge profits, only minimal taxes
In recent years, there has been talk of a digital tax on large Internet companies, such as Facebook or Alphabet (the parent company of Google), which was the subject of the EU summit in Tallinn in September 2017.
The EU executive wanted to propose new rules on fair and efficient taxation of digital businesses by 2018. The main argument of digital tax proponents from the start is that big internet companies make huge profits in these countries, but pay too little from them. taxes every year.
Finally, the European Commission (EC) submitted a proposal to make changes to taxes on digital companies as early as March 2018, including a 3% income tax on certain digital activities of companies with a total annual global income of €750 million (approx.) 20 billion kroner) and EU revenue 50 million euros (1.25 billion kroner). However, the finance ministers of EU member states failed several times to agree on the possible shape of the future digital tax, which Ireland, Sweden and Denmark, for example, opposed.
It’s big money
A study by the European Union Tax Observatory and published this week suggests that the EU could receive around 50 billion euros (1.3 trillion kroner) in additional taxes from multinational companies annually, if the OECD agrees to a 15 percent rate. The study indicates that the adoption of a minimum tax by all countries is not even necessary to be effective. “If a large number of home countries (multinational corporations) have a significant minimum tax application, tax havens will no longer be able to attract them by offering low rates,” the study said.
The union then announced its intention to participate in a global solution within the Organization for Economic Co-operation and Development (OECD). Some countries have already decided to proceed independently. France, for example, approved a 3% digital tax in July 2019, sparking unrest in the United States. But last January, Paris and Washington agreed to a cease-fire – it postponed tax collection and the US promised not to impose planned retaliatory tariffs.
According to the United States, taxation is an unfair business practice
At the same time, the US sees the digital tax collection – which it has adopted in Britain, Italy, Austria and Turkey, for example, but has often been at a rate of a few percent – as an example of unfair business practices where it will primarily affect US companies.
The US response then would be to impose retaliatory tariffs. The Czechs were also originally the target of an American investigation. In March of this year, Washington announced that it had closed the Czech Republic’s investigation because the country had not yet imposed a digital tax.
However, in mid-May, the Czech House of Representatives approved the government’s proposal to introduce a digital tax. A five percent tax is applied to Internet companies with a global turnover of more than 750 million euros (about 19 billion kroner), which will have an annual turnover of at least 100 million kroner in the Czech Republic for taxable services. The Czech Ministry of Finance previously stated that if a solution is found at the level of the Organization for Economic Co-operation and Development (OECD), the Czech Republic is ready to abolish the tax at the national level.