Britain said the world was counting on a rally of some of the richest countries to agree reforms to outdated global tax rules, as Group of Seven finance ministers began a two-day meeting in London on Friday. .
The rally, chaired by UK Finance Minister Rishi Sunak, is the first time ministers have met face to face since the start of the coronavirus pandemic.
Rich countries have struggled for years to agree on a way to raise taxes for large multinational corporations such as Google, Facebook and Amazon, which often record profits in jurisdictions where they pay little or no tax.
The desire of US President Joe Biden to raise taxes on large corporations now creates more chances of an international consensus than under his predecessor Donald Trump, and the need to repair public finances affected by COVID makes it more urgent.
“We cannot continue to rely on a tax system that was largely designed in the 1920s,” Sunak said as he opened the meeting. “And I’ll just say this: The world has noticed it. And I think they have high expectations for what we can all agree to over the next few days.”
He stressed the importance of meeting face-to-face with fellow ministers from the United States, Japan, Germany, France, Italy and Canada. The British government is hosting the event at Lancaster House, an ornate 19th-century mansion almost next to Buckingham Palace.
“You have to be around a table, talking openly and frankly about things,” Sunak told Reuters in an interview this week.
Due to COVID-related restrictions, ministerial delegations have been reduced and there are fewer traveling journalists. The seating plans were redesigned with the help of public health officials, and Sunak greeted the leaders by bumping his elbows, without shaking hands.
But the biggest challenge remains to reach an agreement on tax reform which could then be presented to a larger group of countries, the G20, at a summit in Venice in July.
In a joint letter on Friday, the finance ministers of Germany, France, Spain and Italy wrote that they “will commit to defining a common position on a new international tax system at the meeting of ministers of G7 Finance in London “.
“We are confident that this will create the momentum necessary to reach a global agreement,” they added.
However, Japanese Finance Minister Taro Aso said on Monday that he did not expect an agreement this week on a specific minimum tax rate.
The US Treasury expects a fuller deal when Biden and other government leaders meet at a remote seaside resort in southwest England from June 11-13.
MINIMUM RATE 15%
The United States has proposed a minimum overall corporate tax rate of at least 15%. If a business paid taxes somewhere at a lower rate, it would likely have to pay additional taxes.
Biden had planned to increase the corporate tax rate in the United States to 28%. But on Thursday, he proposed a 15% tax floor in an attempt to gain Republicans’ support for new spending measures.
But just as important to Britain and many other countries, companies pay more tax where they make their sales, not just where they make a profit or set up their headquarters.
The United States wants to end taxes on digital services that Britain, France and Italy have collected, and which it sees unfairly targeting American tech giants for tax practices that European companies also use.
British, Italian and Spanish fashion, cosmetics and luxury goods exports to the United States will be among those facing new tariffs of 25% later this year if there is no compromise .
The United States has proposed to levy the new global minimum tax only on the 100 largest and most profitable companies in the world.
Britain, Germany and France are open to this approach but want to make sure that companies like Amazon – which has lower profit margins than other tech companies – don’t escape the net.
European Union Commissioner Paolo Gentiloni, who is also attending the G7 meeting, said progress had been made ahead of the meeting.
“We are working at the OECD level to have a reallocation of taxing rights for the ‘giants’, including the digital giants, and I think that is a very good path,” he said. at CNBC
Daniel Bunn, a global tax expert at the Washington Tax Foundation think tank, said the proposals were likely to lead to more complex regulation.
“A lot of these rules will, I think, be based on political principles rather than principles,” he said.
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