The proposal aims to discourage multinational companies from shifting their profits to tax havens.
Activists hold a protest on a simulated tropical island beach, which is a tax haven, ahead of a meeting of finance ministers of the European Union in Brussels, Belgium, December 5, 2017. (AFP archive)
Nearly 140 countries will be haggling over key details of a global corporate tax plan this week, with some worried about giving up too much and others eager to make sure the tech giants pay their fair share.
The affluent Group of Seven (G7) democracies approved a proposal earlier this month to introduce a minimum corporate tax rate of at least 15 percent in hopes of stopping a “race to the bottom” as nations compete for the lowest rates.
It’s one of two pillars of reforms that would also allow countries to tax a share of the profits of the world’s 100 most profitable companies – like Google, Facebook, and Apple – regardless of where they are based.
READ MORE: G7 countries set global minimum corporate tax at 15 percent
The deal now goes to the Organization for Economic Co-operation and Development (OECD), which will lead two-day talks starting Wednesday to find consensus among 139 countries.
The proposal will then be taken up by the G20 Club of Rich and Emerging Countries at a meeting of finance ministers in Italy on July 9-10.
“I think we have never been so close to an agreement,” said Pascal Saint-Amans, director of the OECD Center for Tax Policy.
US President Joe Biden has gotten to the heart of the matter by supporting the global minimum corporate tax, and Europeans want a deal, he said.
Negotiations have become more urgent as governments seek new revenue streams after spending huge sums on stimulus measures to prevent their economies from collapsing during the coronavirus pandemic.
Tax heaven not happy
While the G7 – the United States, Canada, Japan, France, Great Britain, Italy and Germany – have approved the plan, they still face obstacles in extending the negotiations to other nations.
The EU members Ireland and Hungary are not enthusiastic about this, as their corporate taxes are less than 15 percent.
Thanks to a rate of 12.5 percent, Ireland has become the EU home of technology giants Facebook, Google and Apple.
But another EU country that has benefited from a low interest rate, Poland, voted in favor of the proposal last week.
Two sources involved in the negotiations told AFP that China, which has a reduced rate for companies in key sectors, does not want a rate higher than 15 percent.