qualify as“historic” During the agreement reached in early June, on the occasion of the G7, the purpose of international tax is to penalize multinational companies that make profits – without declaring them to the tax services of the foreign country where customers and consumers are located – n without consequences is not. While the seven world powers (United Kingdom, France, Italy Canada, Japan, Germany, United States of America) have agreed on Minimum Worldwide Corporate Tax Rate“at least 15%”Its implementation should generate new tax revenue for the states. At the end of the day, there will be countries that are the “winners” of this new global corporate tax, and the “losers”, as observed by the research firm Oxford Economics, which modeled the application of this tax.
Unsurprisingly, the countries benefiting from this new tax will be more than those countries whose favorable taxation has made it possible to capture the declarations of firms. The most prominent of which is France, which will be able to recover profits from sales made in its territory. As a result, by eliminating tax dumping to attract multinationals – particularly in the digital sector – it is new tax revenue for states that is peaking.
“The pandemic has taken a toll on public finances around the world. As governments seek additional revenue, corporate tax is a boon”wrote Oxford Economics in its June 15 study.
EU countries, which will benefit from a 750 billion euro stimulus plan to revive their economies with the end of the COVID-19 health crisis, are no exception. “ The debt/GDP or GNI (gross national income) ratio for Germany and France will be around 1.4 points, Italy 1 point and Spain 0.8 points lower by 2028., notes the research firm. Thus the modeling suggests that the more indebted the country is, the more the new tax will make it possible to reduce the gap between debt and national wealth.
As a reminder, at the end of 2020, France saw its budget deficit triple compared to 2019, INSEE reported. In addition, debt will represent about 117% of GDP in 2021, and the public deficit has risen to 211 billion euros.
Above all, it appears that profits recorded by multinationals from European clients put France, Germany or the United Kingdom in a good position to tax these profits more (7.6 of the profits made by US firms). %) are in Europe. Similarly, Facebook customers in Europe and e-commerce generated by these companies account for 40% of the revenue, notes the firm.
The brakes on the attractions of some countries
Conversely, countries that have so far offered lower tax levels to digital giants that attract the headquarters of Google, Facebook and other e-commerce groups will see a windfall of profits — with a consistent rate — now. will not be paid into the national funds. Countries where these benefits were recorded by the services offered to consumers.
As a result, government debt-to-growth ratios are likely to increase rapidly in Ireland, Hungary, the Netherlands and Luxembourg, without the low tax revenue generated from the former low tax rate. Ireland, which is not part of the G7, has already said through the voice of its finance minister that it is still far from reaching a consensus.
“With this reform, Ireland will become one of the most indebted economies in Europe”, the cabinet believes. So far, the island has applied a tax rate of 12% on declared profits. Hungary imposed it at 10%.
This financial windfall may be accompanied by other indirect consequences expected, for example on foreign direct investment, on the contribution of multinational companies to the real economy in terms of employment or on the added value of companies to the economy. Oxford Economics. “In Hungary, MNCs can choose to transfer their profits and investments”, he warns.
For other countries with more favorable fiscal skies than before, the results should remain limited. “Luxembourg, Hungary, the Netherlands have relatively healthy public finances and the impact seems manageable”, note economists who point out that corporate taxes represented only 15% of the total revenue generated by taxes in Luxembourg in 2019 and 14% of the total in Ireland.
Finally, to know the real consequences of this new tax, Oxford Economics warns that it will be necessary to wait to know the exact framework – as well as the final ratification – and to see how multinationals will adapt to it. The City of London has already announced that it wants to be relieved of the obligation to collect this tax from businesses.