Major advanced economies in the Group of Seven are close to a deal on corporate taxation of multinationals, paving the way for a global deal later in the year creating new rules for imposing levies on larger corporations of the world.
A G7 pact could be sealed as early as Friday after progress has been made among senior officials in recent days – and would be a powerful force and a prerequisite for a deal in the formal negotiations taking place at the OECD in Paris and led by the G20 as a whole.
An OECD deal would likely see the biggest upheaval in international business taxation in a century, drastically reducing the ability of companies to shift profits to low-tax jurisdictions and ensuring that America’s digital giants pay. more tax in the countries where they make sales.
Under the Biden administration, the United States pushed for the G7 to reach its own consensus to boost OECD talks so that a final deal could be reached in the months to come.
Last week, the United States downgraded its ambitions for a global minimum corporate tax rate from 21 percent to an effective rate of 15 percent to increase its international appeal.
He also reassured other countries that he was serious in his offer to allow a portion of the global profits of the largest multinationals to be taxed based on the location of sales, and the two “pillars” of the agreement are inseparable.
In recent weeks, the United States has become increasingly convinced that it has most of the G7 on board with its plans, which built on plans made by the OECD last year. Germany and Italy have strongly supported a global minimum tax.
Daniele Franco, Italy’s finance minister, who chairs the G20, said on Friday that the latest US proposal was “another important step” and that the prospects for a global deal on international tax reform were “now concrete”.
France and the UK have placed more weight on the localization of tax payments. International officials describe the UK as having been “difficult” in the negotiations.
But in London, ministers and officials insist they want to ensure that both elements of the deal come first and that the US administration is serious in pushing for the change to the location of the payments from the corporate tax through Congress.
British officials said over the weekend that their position had not changed, but those close to the negotiations said that over the past week there had been some sort of consensus and an agreement, initially at G7, seemed likely.
The G7 has no formal role in the process, but the nations of the United States, Japan, Germany, the United Kingdom, France, Italy and Canada form a powerful bloc in other forums. The group is hosting a virtual meeting of finance ministers on Friday and a face-to-face meeting on June 4 and 5 in London, where the core elements of a deal can be agreed upon, officials said.
If a deal can be reached informally by finance ministers, G7 leaders could sign it formally at the Cornwall summit June 11-13 by presenting a plan to the 135 countries negotiating under the ‘inclusive framework’ at the OECD.
As a sign of growing interest in the chances of a global corporate tax deal, Jake Sullivan, the US national security adviser, tweeted on Saturday: “The world is closer than ever to a global minimum tax. I am delighted to hear a positive reception to our proposal and thank you to Secretary Yellen and our partners around the world for their work in this area. This is what it feels like to lead the world to end the race to the bottom. “
The G20 have said they want to strike a deal by the summer, and the G7’s progress makes that ambitious timetable still possible, although officials close to the talks believe October may be a more realistic date for a full international deal. – Copyright The Financial Times Limited 2021.