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European Governments Grow More Optimistic on G-7 Tax Ac...

Business Maverick

Business Maverick

European Governments Grow More Optimistic on G-7 Tax Accord

Shipping containers on a barge at Frankfurt Osthafen container port dock near skyscrapers on the financial district skyline, in the financial district in Frankfurt, Germany, on Tuesday, April 20, 2021. Financial markets around the world are waking up to the risks of another coronavirus flare-up. Photographer: Alex Kraus/Bloomberg
By Bloomberg
26 May 2021 0

European governments are increasingly confident a deal will soon be struck with the U.S. on a minimum global corporate tax and related measures to make multinationals pay more to the countries they operate in, according to people familiar with the matter.

President Joe Biden’s administration last week floated a global minimum tax of at least 15%, less than the 21% rate it has proposed for the overseas earnings of U.S. businesses — a level that countries including the U.K. regarded as too high.

While European nations warmly received that offer, they’ve also been pushing the U.S. to focus on measures to ensure multinationals — especially big technology firms such as Amazon.com Inc. and Facebook Inc. — pay more of their tax in the countries where they operate. U.S. officials have opposed any efforts to target specific industries for taxation, such as tech.

U.K.’s Sunak Isn’t Convinced on Biden’s Global Business Tax Plan

In addition to the 15% U.S. offer, European governments see a deal nearing as there is progress in talks toward meeting their demand of ensuring that all digital firms be covered by new rules, according to the people, who spoke on condition of anonymity because the talks are ongoing.

An accord among G-7 nations in coming weeks would signal support building toward a broader deal at the July meeting of the Group of 20, which has been managing the talks on international taxation more closely. The plans will still need to find agreement among nearly 140 countries involved in the Organization for Economic Cooperation and Development-led negotiations.

G-7 finance ministers are holding a virtual meeting on Friday, followed by an in-person gathering June 4-5 in London. The main leaders’ summit takes place in Cornwall, southwestern England, from June 11-13.

Australian Treasurer Josh Frydenberg, in an email, said his country “welcomes the United States’ commitment to continue to engage in the OECD-led discussions seeking to agree a globally consistent approach to the tax challenges posed by the digitalization of the economy.”

Australia, though not a G-7 member, is one of the vice chairs of the OECD’s Steering Group of the Inclusive Framework for Base Erosion and Profit Shifting.

The OECD effort seeks to replace the digital services taxes a growing number of countries are enacting to capture more revenue from companies like Facebook and Amazon. But countries have been vexed in particular with how to ensure taxes apply to Amazon, which has unusual status as a low-margin tech giant.

Read more: Amazon Taxation Becomes Sticking Point in Talks on Global Levies

A U.S. Treasury Department proposal, which was distributed to other governments in April and has been seen by Bloomberg, would subject about 100 of the “largest and most profitable” companies to greater taxation in countries where the firms’ users and consumers are located, as opposed to the countries where they’re headquartered.

It didn’t call for specific numbers, but both revenue and profitability thresholds would have to be set high to capture just 100 companies.

Since lowering the profitability threshold to apply to Amazon would also enlarge the group of companies as a whole, the topic of allowing taxation on specific lines of business has come up in the talks — something that could target Amazon’s higher-margin Web Services business.


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