A promising agreement on global taxation

Editorial of “The World”. The initiative by the G7 finance ministers on Saturday 5 June is a decisive step towards the upheaval in the functioning of global taxation. By supporting the idea of ​​setting a minimum tax rate on the profits of multinationals, the United States, the United Kingdom, Canada, Germany, France, Italy and Japan are finally giving themselves the means to stop the financial race that dominates. is. global economy in recent decades.

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The correction revolves around two axes. The first objective is to provide new tax rights to countries in which MNCs have their customers and markets without a head office or establishment. The amount will then be shared among the states according to the distribution key which is yet to be defined.

The second axis is strictly related to the minimum tax rate. A large company that chooses to set up its headquarters in a low-tax jurisdiction must pay the difference between the rate in that country and the effective rate in the country where it actually makes its profits. Thanks to these new rules, large companies will have no interest in manipulating their accounts to concentrate their profits in tax havens. Each country would become a tax collector of last resort, which would allow it to counter the fiscal dumping of the others.

ambitions revised downward

While the principle of this change is to be welcomed, there is a caution in the modalities of the application, which will be discussed within the framework of G20 finance in Venice (Italy) on 9 and 10 July. First, there is the question of the number of companies involved. In the first part, the figure of hundred companies is given. This is small considering the number of multinationals that abuse tax optimization, especially as some sectors, such as the mining and extraction industries, would be excluded from the system. In addition, there is intense lobbying to exempt financial companies. It’s not fair. Negotiators also need to be vigilant on the key to distributing tax revenues, so that developing countries get their fair share.

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Last but not least, the amount of the minimum rate is yet to be decided. In this regard, the ambitions have already been revised downwards, the concern of many NGOs. In early April, the United States grew at a rate of 21%. After two months, it is only a question of the rate of” at least “ 15%.

Google, Amazon and Facebook have praised the work of the G7. But if the reform is as welcome as these companies declare, why have they invested so much imagination in recent years to make taxes as low as possible? Is their enthusiasm cynical or a respite from the realm of reform that could have been much more detrimental to their profits?

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The project nonetheless remains promising. Theoretically, once the principles are achieved in an internationally coordinated manner, each country would be able to go beyond 15% on its own. Public opinion is therefore likely to continue to pressure its leaders so that there is as little distortion as possible between the tax rate paid by digital giants and local SMEs. More than a rigid framework, this improvisation encourages a dynamic. Leaders must now have the courage to seize it to gain control over the taxation they have shunned for too long.

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About the Author: Forrest Morton

Organizer. Zombie aficionado. Wannabe reader. Passionate writer. Twitter lover. Music scholar. Web expert.

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