Under the aegis of the Organization for Economic Co-operation and Development (OECD), forced by the G20 to end it in 2017, the reform aims to optimize corporate taxation, a national privilege equality, in the era of groups. Digital Economy. This goes beyond the first project successfully undertaken by the OECD: the establishment of an automated exchange of banking information between countries. From 2009 onwards it became possible to abolish banking secrecy and collect 102 billion euros of taxes. It remained to deal with tax competition between states to attract multinationals.
The reform has two “pillars”: “pillar 1” comprises a fraction of the profits generated by multinationals (eg 20%), and distributes revenue between countries according to the turnover achieved. Example: Company A made a profit of 100 billion. It pays 20% or 20 billion in taxes. This amount is then broken: if A gets 10% of its sales in France, France charges 2 billion. While the OECD proposed to target companies with more than 750 million turnovers in two areas of activity (in relation to digital services and consumers), the new US democratic administration is advancing another criterion. Pascal Saint-Amans, director of the Center for Policy and OECD Tax Administration, said, “The United States proposes to take on the winners of globalization, for example the 100 most profitable companies in the world, which make up half of the world’s profits . “
These clearly include digital giants such as Google, Amazon, Facebook or Apple, whose profits are exploding. “Pilar 1” will reclaim $ 100 billion in tax revenue between countries.
“Pillar 2” is to impose a global minimum tax on profits. The rate mentioned in the discussion in the OECD was 12.5% but the United States is considering a 21% rate and “no longer based on a world average, but with a country-by-country approach”. In other words, “the profits of multinationals will be subject to the minimum tax wherever they are located”. For the NGO Network for Tax Justice (Tax Justice Network), if the 21% rate was maintained, “it would generate at least $ 300 billion in additional revenue in the world”.
Negotiations were stalled to stop the Trump administration engaged in a comprehensive policy of tax relief. Corporate tax (CIT) in the United States fell from 35% to 21% during his tenure. Everything has changed since the election of Joe Biden, in the context of an epidemic that is a permanent and forced state to find resources to finance its plans to end the crisis: according to the IMF by the G20 countries $ 12.7 trillion has been spent. Hence a setback proposal by Treasury Secretary Janet Yellen in early April to bring about an ambitious reform of taxation of multinationals. Supported by the IMF, the initiative goes against the backdrop of the US president’s plan to raise corporate tax to 28%. The United Kingdom wants to increase it to 25% by 2023.
“Technically, reform is ready, but do we have political determination? “, A few weeks ago, before confirming France’s position on the same wavelength as Germany, French Minister of Economy Bruno Le Myer. The OECD expects a political settlement as soon as possible.” The next phase, 9 and 10 July The Ko are G20, and there is a final meeting in October, ”according to Mr. Saint-Amans.
The agreement should then be the subject of a multilateral conference. Multinationals are to be expected from consulting and law firms living with intensive lobbying and tax optimization. While Germany called it a “great step”, France has pledged to pursue the file, presiding over the European Union in the first half of 2022. This will not be an easy task. Many European countries have not viewed this reform favorably, starting with Ireland, where many multinationals have implemented their European headquarters, Dublin, since 2003, a corporate tax rate of 12.5%.
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