The French Finance Minister, Bruno Le Maire, took stock of the negotiations underway at the OECD on international tax reform on Tuesday 5 October in Luxembourg.
“We have not yet reached an agreement” on Pillars I—reallocation of taxing rights— and II—minimum effective taxation— but “a final agreement is within reach”, Mr Le Maire declared, referring to technical discussions hiding “political blockages”.
On Pillar I, he indicated that France was defending a rate of 25% for the calculation of reallocations of surplus profits. Countries such as Turkey and India are calling for a 30% rate, while the groups’ home countries are calling for 20%.
According to the French minister, Pillar II concentrates “the deepest blockages”, because the provisions on the table are likely to call into question the economic models of countries that have attracted foreign investment to their soil. But the question of the effective minimum tax rate, which should finally be set at 15% instead of ‘at least 15%’, is no longer the hardest point of the negotiations. Mr Le Maire also welcomed Ireland’s attitude, which is changing on this issue.
“The major issue”, said the minister, is “carve-out”. Some countries, such as Poland, are requesting that economic elements—salaries, physical assets—held by foreign groups on their territory be taken into account, in order to reduce the calculation of the tax base. Without such a carve-out, Warsaw would lose 65-70% of its tax revenues. A transitional period of 10 years has been brought up to avoid the countries concerned losing billions of euros in taxes overnight from the moment the international reform applies, perhaps as early as 2023.
Another difficulty, this time for China, concerns the treatment of groups in the internationalisation phase. As Beijing does not wish to apply the Pillar II priority rule, it would be up to the countries where Chinese groups are based to levy part of the effective minimum tax. To make this provision effective, it is necessary to define what constitutes the ‘international development’ (its size, number of countries of operation, amount of internationalised assets) of a group.
Mr Le Maire hopes that once the international agreement is finalised by the G20 summit in Rome at the end of October, the European Commission will present a directive transposing Pillar II of the reform and that it will be adopted under the French Presidency of the EU Council in the first half of 2022. (Original version in French by Mathieu Bion)