Negotiations on international corporate tax reform are in full swing. The United States sent a new proposal to its global partners at the OECD this week.
The US plan proposes a different formula from what is currently envisaged by the OECD (see EUROPE 12636/13). Under the plan, only the world’s largest and most profitable companies would be subject to the new rules, regardless of their sector of activity, based on their level of revenue.
The proposal was rather well received and in any case helps to speed up the negotiations.
At a press briefing on Thursday 8 April, French Finance Minister Bruno Le Maire, who has been pushing for this reform for the past 4 years, said that these were “sound and interesting proposals”.
Earlier this week, the US Treasury Secretary, Janet Yellen, had reiterated her commitment to a global minimum corporate tax rate (see EUROPE 12692/19).
On minimum taxation, the US was opposed to a country-by-country approach, explained Mr Le Maire. He believes that there is now “almost perfect alignment between the American position and the French position”.
Of course, the question of the rate has yet to be settled. 2 years ago, France proposed that the global minimum tax rate be set at 12.5%. The French minister was open to a higher rate, 21% as proposed by the Americans, but doubted the ability of some of his European counterparts, notably the Irish Finance Minister, to be so open.
The scope proposed by the Americans is broader than that of the OECD proposal. It would affect about 100 large multinationals.
For France, above all, it is crucial that the big four tech giants—Google, Amazon, Facebook, Apple—be fairly taxed. According to a first reading of the proposal, the minister considered that they should be included in the scope, but France, like other European countries, is still analysing the technical repercussions of the American proposal.
The flaw in the OECD proposal was that it forced taxation to distinguish the portion of revenue related to the company’s digital activity, which was complicated to do from an accounting point of view, he explained. The US proposal is therefore seen as a simpler solution.
Nevertheless, France does not give up its wish to see the two pillars of the reform (minimum taxation and digital taxation) adopted together. “We will not adopt pillar II without pillar I. We will not adopt pillar I without pillar II”, the minister clarified.
“Historic opportunity”
For Mr Le Maire, this new proposal creates an “historic opportunity”, and all OECD countries must come together in the coming weeks to seize it.
Fast action is required. The minister did not fail to point out that the electoral deadlines in France and Germany will make it difficult to reach an agreement beyond the summer of 2021.
If an agreement is reached on that schedule, he estimated that an EU directive implementing the agreement could then be adopted under the French Presidency of the EU Council in the first half of 2022.
“We have had enough cold showers in recent years to continue being cautious”, he qualified, admitting that getting a deal done in such a short time remains a considerable challenge.
The communiqué issued at the end of the G20 Finance Ministers’ meeting on Wednesday 7 April does not elaborate on these new developments and merely reiterates, once again, the G20’s determination to find a global and consensual solution on the two pillars of international tax reform by mid-2021.
“We acknowledge the progress made to date and urge the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to address the remaining outstanding issues with a view to achieving an agreement by the set deadline”, it reads.
See the G20 Finance communiqué: https://bit.ly/3t3m5Qq (Original version in French by Marion Fontana)