The G7 countries support the international taxation of large international companies, expects a senior American official. An agreement could already be finalized this Friday. One of its goals is to prevent companies from turning their profits into taxes.
Deputy Finance Minister Wally Adeo told Reuters on Monday he viewed the US proposal to introduce a 15-case overall tax rate as “strong support” among the main industrialized countries of the G7 . This is the minimum rate.
Further Financial Times The G7 asks those involved if they are close to an agreement. 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 tax rules for large companies. They now regularly move their 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, it’s essentially a strong signal for another conference cycle: the OECD. The 139 countries of the club come together on a new tax system. The biggest corporate tax change in a century is expected to happen. The US government wants the influential G7 to come to the OECD with a specific plan. OECD negotiators aim for a policy-based deal over the summer.
US Assistant Secretary of State Adeomo said a final deal could be reached when the G20 meets in Rome in October to prepare more details.
International income tax ranges from 21% to 15%
In April, the United States proposed a 21% international corporate profit tax. But last week, this percentage was revised to 15% to make it more attractive to other countries.
Multinational companies are taxed on the basis of sales in a country, for example, and not on the basis of the location of the head office. This should allow all countries to 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 has said she wants to end the “grassroots race” 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 has actually cut corporate taxes from 35% to 21%. There are also countries that use low taxes on profits as a competitive tool to attract business. The question is whether they will accept such a new tax system.
But a higher tax rate won’t just scare businesses off, Yellen said earlier. Given a country’s business environment, it is also important that “governments have sufficient tax revenue to invest in public goods and services and be able to respond to a crisis”.
The UK is a bit cautious in the G7 countries. Prime Minister Boris Johnson has said taxing big tech companies like Google and Facebook is a priority. “A new tax deal is important to ensure digital businesses pay UK taxes based on their business 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.