Finance ministers meet in Venice to finalize global tax deal
VENICE, Italy – The world’s top economic leaders meet on Friday to discuss crucial details of what would be the biggest overhaul of the international tax system in a century, kicking off a three-month race to secure a deal by the end of the year.
Gathered in this former hub of international trade, the finance ministers of the Group of 20 countries are moving forward with plans to end global tax havens and force multinational corporations to pay an appropriate share of tax everywhere. where they operate. The negotiations, which will have far-reaching ramifications for the finances of global companies, have continued for much of the past decade and are entering what officials hope will be the home stretch.
“A few important weeks and months are ahead,” said Pascal Saint-Amans, director of the Organization for Economic Co-operation and Development’s center for fiscal policy and administration, which oversees the talks, in a brief interview ahead of the Mountain peak.
The meetings follow a breakthrough in negotiations that took place last week when 130 countries backed a conceptual framework for the new tax plan. The plan includes a global minimum tax of at least 15% that each country would adopt and new rules that would force tech giants like Amazon and Facebook and other big global companies to pay taxes in countries where their assets or services are sold even if there is no physical presence.
Officials hope to secure a deal by October, when leaders of the G20 countries return to Italy for the last summit of the year.
The stakes in meeting this deadline are high, especially for the United States. The deal aims to end a cascade of taxes on digital services that many countries around the world, including France, the UK and Italy, are adopting to capture more tax revenue from US tech companies. The United States has called the taxes discriminatory, and the Biden administration has approved retaliatory tariffs on wine, cheese, clothing and other products from those countries that could come into effect later this year if a deal is not concluded.
The United States wants European countries to remove taxes on digital services immediately, but policymakers have suggested they could stay in place until a new deal is fully enacted, which could take years. .
The European Union is also moving forward with a new digital tax even as OECD tax negotiations advance. Treasury Secretary Janet L. Yellen is expected to urge her European Union counterparts to delay such a decision when she visits Belgium next week at the end of her trip to two countries.
Other outstanding issues remain to be resolved this weekend and in the months to come, including the exact rate that global businesses would face.
Ahead of the meetings, Treasury Department officials said countries have yet to agree on a global minimum tax rate, which the United States and France would like to be above 15%. Other low-tax countries, like Ireland, have so far refused to sign the deal, and G20 countries must figure out how to get those hold-backs to accept the tax.
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Mr Saint-Amans said he believed reluctant countries like Ireland would join the deal if the United States was able to push the reforms through Congress – which he acknowledged was not not guaranteed. Republican lawmakers have expressed some skepticism about the global minimum tax, in part because they see it as a workhorse for the Biden administration to raise the corporate tax rate in the United States.
President Biden linked his proposal to increase the corporate tax rate in the United States to 28% from 21% to a global minimum tax, saying it would deter companies from simply moving their operations overseas . Republicans, who cut the corporate rate from 35% to 21% in 2017, said they would oppose any changes to these tax cuts.
Treasury officials have expressed confidence that the global tax can pass the course in the United States. But officials did not say whether the White House believed it should win the support of reluctant Republicans or whether they could push the tax changes through Congress only with Democrats’ votes. Representative Kevin Brady of Texas, the top Republican on the Ways and Means Committee, told reporters this week he believes the Biden administration’s proposed tax review would be dead when he came to Congress.
“I think first of all this is an economic capitulation that other countries are happy to accept, as long as America makes itself so uncompetitive,” Brady said. “And second, I think there are too many competing interests here for them to finalize a deal that would be acceptable to Congress.”
Other nations must also determine how to transform their commitments into domestic law.
Mechanisms for changing the way the biggest and most profitable companies are taxed and the exceptions for financial services, oil and gas companies will also be at the heart of the discussions. Some already fear that the exclusions will lead to new tax loopholes.
Taxation is not the only issue on the agenda this weekend. Ms Yellen will work with her international counterparts on a plan to provide more assistance to developing countries to fight the coronavirus pandemic and on how to roll out vaccines more widely.
Despite strong global economic expansion this year, the International Monetary Fund this week warned of a worsening “two-track recovery” and said a “growing divergence in economic fortunes” was leaving many countries behind. .
Ms. Yellen, who is on her second international trip as Secretary of the Treasury, will hold bilateral meetings with many of her counterparts, including officials from Saudi Arabia, Japan, Turkey and Argentina. China, which has adhered to the global minimum tax framework, is not expected to send officials to the gathering of finance ministers and central bank governors, so there will be no talks between the two largest economic powers in the country. world.
The forum will be another opportunity for the Biden administration to demonstrate the United States’ renewed commitment to multilateralism.
Mr Saint-Amans expressed optimism about the trajectory of the tax negotiations, which were on life support during the last year of the Trump administration, and attributed this in large part to the new diplomatic approach of the United States. .
“It took an American election and some work at the OECD,” he said.