France and Germany hope to back support for a global minimum tax rate proposed by the United States.
France and Germany on Wednesday pushed for a “historic” deal between major economies on a minimum tax rate for multinational corporations in hopes of bolstering support after skeptical European countries opposed the plan.
Led by US President Joe Biden, the proposal for a minimum tax rate of 15 percent has got into turmoil after Ireland’s Treasury Secretary expressed “significant reservations”.
“The change in the (US) government offers a historic opportunity … and we have to seize opportunities when they arise. Now the time has come. Now we have to act,” said French Finance Minister Bruno Le Maire at a joint press conference of the coming Franco-German Economic and Financial Council.
His German counterpart Olaf Scholz said he was “optimistic” about the chances of sealing an agreement that would end “catastrophic fiscal competition” between the countries.
“We are about to conclude an international agreement,” which will lead to “a revolution in international corporate taxation,” added Scholz.
Biden’s government last week called for an agreement on a uniform tax rate of at least 15 percent in negotiations with the Organization for Economic Cooperation and Development (OECD) and the G20.
But on Tuesday, Ireland’s Treasury Secretary Paschal Donohoe said the country had “a really significant concern” about a global interest rate, which means that “only certain countries and economies of a certain size can benefit from this base.”
Eyes on G7
The objection carries weight because Ireland is home to an oversized number of technology and pharmaceutical companies that the country has attracted because of its lower tax rate.
Last month, the Dublin Treasury Department released a forecast that if a global minimum tax rate were introduced, two billion euros ($ 2.4 billion) in revenue could be lost every year from 2025 onwards.
Donohoe’s concerns were confirmed by the Hungarian Foreign Minister on a trip to Dublin on Tuesday.
“Like Ireland, Hungary is in favor of a low tax level,” said Peter Szijjarto.
Ireland’s corporate tax rate is currently 12.5 percent and Hungary’s nine percent – while France and Germany levy tax rates of almost 30 percent according to OECD calculations.
Luxembourg, also home to countless multinationals, has advocated a “minimum taxation” to create “conditions for fair competition” between countries – but has not specifically commented on the proposed 15 percent rate.
The finance ministers of the G7 group of advanced nations – made up of Germany, Canada, the United States, France, Italy, Japan and the UK – will meet next week in London, where they could support the US proposal.
Le Maire said he, Scholz and the British Chancellor of the Exchequer, Rishi Sunak, had agreed to “do everything possible” to work out an agreement at the meeting.
They will then build on this at the larger G20 summit in Venice in July, said Le Maire, adding that “we will be able to convince all of our partners step by step”.
The IMF chief also offered her approval of the plan on Tuesday.
Finance chiefs have called a minimum tax necessary to curb competition between countries as to who can offer the lowest tax rate to multinational corporations.
They say “race to the bottom” detracts from revenue that could be channeled to other government priorities.
Global minimum tax for companies is getting closer to reality
© 2021 AFP
Quote: France and Germany are pushing for a “historic agreement” on the global corporate tax rate (2021, May 27), accessed on June 2, 2021 from https://techxplore.com/news/2021-05-france-germany-historic- agreement-global. html
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