The enormous public spending with which countries have had to respond to the onslaught of the pandemic has accelerated debates that dragged on for years. Specifically, that of the need for a fair and efficient tax system in the era of the digital economy. The G7 Finance Ministers, meeting this Friday in London, are one step away from reaching a historic pre-agreement on a minimum corporate tax – 15% – to curb the practices of dumping tax carried out, above all, by large technology companies.
It is the first face-to-face meeting of those responsible for Finance of the seven most advanced economies in the world since the coronavirus crisis ended the large face-to-face meetings. With the necessary distancing measures, the ministers have begun to prepare the final decision to be taken by the G7 Heads of State and Government at the summit to be held on June 11 in the British coastal region of Cornwall. Before beginning an intense discussion that will last until this Saturday, its participants have been able to read the open letter signed by the ministers of the four largest economies in the eurozone, published in EL PAÍS and the main European newspapers.
“The dumping Tax cannot be an option in Europe or in any country in the world. This practice would only lead to an even greater drop in corporate tax collection, more inequality and the impossibility of financing basic public services ”, the Spanish Nadia Calviño, the French Bruno Le Maire, the German Olaf Scholz and the Italian Daniele Franco. The four denounced the practice carried out by large technology companies of shifting their global profits to those territories – Ireland, for example – that offer them greater tax advantages. This despite the fact that its presence is already global, and its sales and benefits are particular in each specific country.
The conviction that today more than ever tax coordination is necessary to avoid the existence of winners and losers in the new digital economy has generated in a few months the consensus that was pursued without success for years. The new US administration of Joe Biden has been the one that has put on the table the figure of 15% – although initially it proposed 21% -, welcomed by the partners of the European Union, or by the new lonely actor that is the UK after Brexit. “The rest of the world is watching us,” British Finance Minister Rishi Sunak told his guests. “We cannot continue to depend on a tax system that was designed for the most part in the 1920s.”
The momentum in London will still face numerous obstacles. The agreement on the need for a minimum corporate tax does not imply that the 15% figure is the final one. And, in any case, the will expressed by the G7 will be very relevant, but it will only be a first step in a much more global debate, the next stage of which will be the G20 summit in Venice next July. It should also be established what criteria are applied, for example, to companies like Amazon, with huge sales figures but lower profit margins than that of Facebook or Google.
In the background of the discussion there is also an issue that confronts the United States and several of its European allies. The United Kingdom, France and Italy have imposed on their own a digital tax that Washington considers unfair to their companies. Above all, argues the US administration, because they mainly receive the “punishment” derived from tax practices that many European companies also carry out. If an agreement is not reached, the fashion, cosmetics and luxury goods sectors of the United Kingdom, Italy or Spain, face tariff increases of up to 25% on their exports to the US market.
The Biden Administration, represented in London by the US Secretary of the Treasury, Janet Yellen, has also proposed a solution for the 100 largest multinationals in the world to pay taxes wherever they generate their profits, regardless of whether they have a physical presence in the territory. This is the other pillar, in addition to a global minimum tax, on which the OECD is working, in charge of coordinating negotiations between more than 130 countries to reach a consensus on the reform of the international tax system.
The White House initially proposed raising corporate tax within the United States to 28% – after Donald Trump’s tax reform that reduced it from 35% to 21% – although last Thursday it was willing to keep it at 21%. Current% on condition of establishing a minimum floor of 15% after deductions. It was an attempt, above all, to gain greater support from the Republican opposition for his spending plans.
In a sign that, even in the most enthusiastic of scenarios, words always go faster than deeds, the French Minister of Economy, Le Maire, assured the BBC on Friday that “they were one millimeter away from reaching an agreement historical”. His Japanese counterpart, Taro Aso, however, had already warned since Monday that he did not expect to reach the agreement on the minimum corporate tax this week.