G7 launches financial dynamics, completes Ireland

The G7 Fund is meeting in London this Friday to discuss international tax reform. With the intention of targeting multinational corporations and promising to establish a minimum tax rate. Starting in Ireland, this is enough to anger countries that are strongly opposed to the plan.

German Finance Minister Olaf Scholes has said that this could be a real “tax revolution” internationally. In the multilateral game since the election of Joe Biden, the United States has been determined to impose its leadership to enforce a global minimum tax on companies.

The project, which has long been considered a sea snake and has been discussed at the OECD for four years, has clearly gained credibility in recent weeks under US leadership. During the G7 finance meeting in London, major global powers will be able to confirm the policy of a common minimum tax rate for multinational corporations this weekend.

However, the official announcement of a deal should not come before the G20 in July. This is because many parameters such as the scope of the multinationals targeted by this taxation are still defined. After all, it is necessary to agree on the minimum rate to be used in the 136 countries involved.

15% rate?

After considering a site as 21%, the United States now proposes a minimum tax rate of 15% for profits. Objective: Fight against optimization and tax evasion.

Today, a company can choose the country it wants to tax, even if it receives the bulk of its overseas income. As a result, many are setting up their headquarters in tax havens or even in tax havens. But at a time when Joe Biden plans to increase the national corporate tax rate to fund his infrastructure restructuring program, the United States has every interest in pushing for international tax reform to encourage U.S. companies. Eager to relocate their profits.

“We have to put this race down,” US Secretary of State Janet Yellen said in April. A situation that pleased France after the failure of negotiations at the OECD on the generalization of the “Kafa tax”. Other European countries, such as Germany or Italy, which have a corporate tax rate of 30%, have also publicly welcomed the US initiative.

Ireland and Hungary reject the plan

The US proposal has received enthusiastic reactions from developed countries. There is some more reluctance, even real resistance. As the leader of the useless clan, Ireland has clearly expressed its hostility to the project. There, the CIT rate was set at 12.5%, which helped Ireland attract big international companies. “We have a very serious allocation. (…) I am proud of the role that (this ratio) has played in our growth,” said Basel Donohue, the country’s finance minister.

At 9% of the corporate tax rate, Hungary is lower than Ireland. “We cannot support a tax increase, even if the idea has influential supporters,” Hungarian Finance Minister Andrs Talloy responded, lamenting that the reform would only benefit higher taxation and backward economic powers. International tax competition. “The Hungarian government, as always, is trying to maintain good relations with the US leadership, but Hungarian interests cannot be driven by the interests of another state,” he added.

Line Asylum, Jersey Island adopted a similar position. Its chief minister, John Le Fondre, especially advised Joe Biden to stay “close to home” before “manipulating the financial policies of others”. “Maybe the United States should look at states like Delaware before telling the rest of the world what to do,” he said.

Bahamas, United Arab Emirates, Switzerland, Cayman Islands வது Introducing the minimum income tax rate globally will penalize many taxpayers. But there is no doubt that most of them are particularly sensible to the question and are becoming more and more isolated. Within Europe, even countries with favorable taxation, such as the Netherlands or Luxembourg, would be constructive and in favor of a global tax policy.

Are global minimum tax opponents trapped?

While the game may seem to have already been lost to countries strongly opposed to the global minimum tax, Ireland did not say its last word and wanted to push until the last minute. In the hope that the OECD will end up setting a ratio close to or equal to its national rate.

In this regard, the United States can be considered the first victory for those who oppose the proposed reform of 15% instead of 21. If Ireland or Hungary in particular had the power to block European negotiations on this matter, it would no longer be in the OECD, where their influence would be so limited as to not allow a denial to be obtained.

Of course, countries that oppose the initiative can always oppose it and refuse to align by maintaining taxation in their favor. But this position will have the effect of increasing the tax revenue of other countries. In fact, the scheme discussed in the OECD provides that the country of origin of a company can distinguish between the prevailing rate in the country in which it is located and the minimum rate in the world.

For example, if the retained world minimum rate is 15% and Ireland decides to maintain its national rate at 12.5%, the French tax administration could tax the profits of a triangular company based in Dublin at 2.5%. So any multinational corporation affected by the reform will pay at least 15% tax on profits, regardless of country. With such a mechanism, the tax benefits of transferring profits would be minimal.

According to a study released by the European Tax Laboratory, the introduction of a minimum rate of 15% would allow the EU to collect 50 billion euros in additional revenue, including 4.3 billion for France. On the other hand, with a rate of 25%, as recommended by the director of the laboratory, Gabriel Jugman, revenues will be very substantial: 170 billion across the EU and 26.1 billion for France.