Meeting physically in London for the first time since the pandemic, the finance ministers of the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) were “close” to an agreement on international tax reform on Friday 4 June, as we went to press.
In a statement, UK Chancellor of the Exchequer Rishi Sunak - whose country holds the rotating presidency of the G7 - reported “productive negotiations about reforming the global tax system”.
Late in the day, on BBC News, French Finance Minister Bruno Le Maire clearly saw the possibility of a deal the same evening or the following day. “I think we are not far from a global agreement, and that’s very good news”, he said.
“We are still working, there are still some slight difficulties, but I hope that at the end of this G7 we might have a global agreement on both pillar I and pillar II”, he continued.
On pillar I, the taxation of digital technology, the stumbling block is, of course, the scope of the businesses that will be affected. “It must catch all the important digital companies, that’s one of the points that is being discussed”, said the French minister.
On pillar II, minimum corporate taxation, it is the rate to be applied that is giving the negotiators a hard time. “That’s clearly the most important point and the most tricky difficulty”, acknowledged Bruno Le Maire.
The American administration of Joe Biden had initially proposed a rate of 21%, supported by France, before changing its mind and proposing a rate of 15%, in order to rally more partners. For Bruno Le Maire, this last proposal is “a starting point, but only a starting point”. He added that “to have something credible, we need a high rate”.
It is not yet clear whether or not a specific rate will be included in the final ‘G7 Finance’ communiqué, which will be issued after the meeting on Saturday 5 June.
According to Bloomberg, an agreement on a minimum corporate tax rate of “at least 15%” is being discussed. This formulation would leave room for manoeuvre in future talks.
An earlier draft text leaked to the press this week expressed strong support for an “ambitious” minimum corporate tax and a fair distribution of rights to tax the profits of multinationals, reports AFP.
Paris, Berlin, Rome and Madrid keep up the pressure
In an op-ed published that morning in The Guardian, France, Germany, Italy and Spain applied pressure, calling on their partners not to miss this opportunity to strike a “historic” deal.
The finance ministers of these countries, Bruno Le Maire, Olaf Scholz, Daniele Franco and Nadia Calviño, have committed to “defining a common position on a new international tax system at the G7 Finance Ministers’ meeting in London this Friday”.
In their view, the US proposals on the two pillars of reform (see EUROPE 12694/11) are a step in the right direction. “It is within our reach. Let’s make sure it happens. We owe it to our citizens”, concluded the four ministers.
An agreement at the ‘G7 Finance’ meeting would provide the political impetus for an agreement at the July ‘G20 Finance’ meeting in Venice and at the October G20 summit in Rome. (Original version in French by Marion Fontana)