Taxes on multinational corporations enter key OECD negotiations ahead of G20

After the historic agreement of the Group of Seven on a global tax on multinational companies, negotiations continue this week in the Organization for Economic Cooperation and Development to reach a consensus among the 139 participating countries, while some remain hesitant and others fear giants such as Amazon will escape the new rules.

The Paris-based Organization for Economic Co-operation and Development (OECD) has received a mandate from the G-20 to design this global tax floor for a better distribution of tax revenue from multinational corporations.

The entity will hold a critical meeting on Wednesday and Thursday to determine the general framework for reform.

The moment of truth will be the meeting of G20 finance ministers in Venice on July 9-10, which may know the path to a final agreement by the end of the year.

“I think we’ve never come close to an agreement,” Pascal Saint-Amans, head of tax affairs at the Organization for Economic Co-operation and Development, commented in June.

“There is a very strong dynamic, the Europeans want an agreement. I think everyone understands that an agreement is better than no agreement,” St Amans commented on BFM Business on BFM Business Radio.

The reform aims to end tax competition at a time when countries are spending heavily on dealing with the pandemic, while computer giants are getting richer.

Under the US momentum, the G7 meeting in London raised the issue in early June and pledged to set the global corporate tax rate “at least 15%”, along with equitable distribution of tax on corporate profits, for multinational corporations located in many countries.

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This agreement by the G7 (United Kingdom, France, Italy, Canada, Japan, Germany and the United States) was described as “historic” by British Finance Minister Rishi Sunak, who chaired the meeting.

The consensus should be expanded to include all countries participating in the discussions.

The 15% proposed by the United States does not have unanimous support, rather it is facing opposition from Republicans in the US Congress.

Some EU countries that have made tax competition one of their main attractions, such as Ireland and Hungary, are among the reluctant nations.

Poland, which has opposed in the past, lent its support to the project last week, which is “decisive” support, according to French Economy Minister Bruno Le Maire.

– Red line –

Persuading China, which has also raised “concerns” about the project, will be a challenge, in the words of US Treasury Secretary Janet Yellen.

Two sources involved in the negotiations told AFP that the Asian giant is applying discounted import rates to companies involved in certain innovative activities and does not want a lower rate higher than 15%.

In turn, the UK has proposed exempting its financial sector from the first pillar of the reform, which adjusts the distribution of taxable rights depending on the country in which the business is carried out.

Other points still have to be settled on the tax basis for the future minimum tax or number of listed companies.

The US proposal targets the 100 largest multinationals, an insufficient number indicated at the end of May by the Group of 24, a group of emerging countries that includes Argentina, Brazil and India.

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France also wants to ensure that all computer giants are included in the reform. Minister Le Maire insisted it was a “red line” for Paris.

Doubts remain about Amazon, part of its activities, such as distribution, is considered not profitable enough to enter the field of repair, unlike “cloud”, an activity from which the American giant brings significant profits.


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