Finance ministers and central bank governors of the G7 countries (France, Germany, Italy, the United Kingdom, Canada, the United States and Japan) made “real progress” on international tax reform on Wednesday 17 July in Chantilly, French Finance Minister Bruno Le Maire said after the meeting.
Paris' stated objective: to pave the way for an agreement at the OECD in 2020. “If seven states fail to find a compromise, I cannot imagine that 129 states can find a compromise at the OECD level”, the minister said Wednesday morning.
Agreement-in-principle on minimum taxation.
The discussions took place on the basis of the OECD work programme agreed by the G20 at the Osaka Summit in June (see EUROPE 12272/3), which is based on a two-pillar approach.
On the second pillar of the reform, the introduction of an effective minimum corporate taxation, there would have been a very broad consensus on the principle at the meeting. “The principle of minimum taxation has taken root for the first time”, a source from the French G7 Presidency welcomed.
As anticipated, however, the ministers were unable to agree on the definition of a rate (see EUROPE 12296/20). The issue would not even have been discussed and the choice of a single rate or a rate corridor would not yet be decided.
Complicated discussions on the taxation of digital businesses.
As for Pillar I, which focuses on how to reform international tax rules to determine where tax should be paid, on what basis and how to allocate taxable profits between jurisdictions in the digital age, one source expressed a “real sense of urgency and willingness to do so”, but noted that there were still discussions on specific criteria and, in particular, how to take into account different business models.
Minister Bruno Le Maire had predicted “difficult” discussions on this point with the United States. “The American position has recently hardened”, he said, referring to last week's announcement that the United States was opening an investigation to determine whether the French ‘GAFA tax’ is discriminatory and whether it hinders American trade (see EUROPE 12294/10).
“We have taken a clear step towards our American friends by agreeing to negotiate a new global tax on digital activities and not only on digital companies”, said Bruno Le Maire on Wednesday morning, now waiting for a “step” in return.
The United States is in favour of an approach that does not apply solely to a subset of companies with a strong digital dimension and would prefer it to be broader scope, in order to address the more significant consequences of the digital transformation of the economy.
“I think that, on the part of France, this is a very important gesture we have made towards our American allies”, he said, stressing nevertheless that the Paris red line remains that the specificity of digital companies must be taken into account. However, it is precisely on the issue of the taxation of “highly digitised companies” that difficulties persisted on Wednesday evening, according to several sources.
G7 ministers have also reportedly agreed that the two pillars should be examined ‘in tandem’. Discussions will continue overnight to finalise the Presidency's statement, which will be published on Thursday at the end of the meeting. (Original version in French by Marion Fontana)