Eager to raise taxes in the United States to finance a colossal infrastructure project, the new American administration wants to take advantage of the G20 summit to defend the idea of a global minimum tax.
Finance ministers and central bank governors from G20 countries met virtually on April 7. In addition to helping poor countries, participants were to debate the proposal of the new US Treasury Secretary Janet Yellen, who wants to negotiate a minimum corporate tax rate globally. Earlier this week, she explained that she wanted to put an end to “30 years of race to lower corporate tax rates”.
The American plan would consist, in the event that companies would have established subsidiaries in a country with a low level of taxation, to tax their profits above the local rate by establishing a minimum tax rate on an international scale. The aim would be, without dictating their fiscal policy to States, to reduce the advantage for multinationals to choose to domiciliate their profits in the most welcoming countries.
The United States, like developed economies, also seeks to tax income from intangible sources such as pharmaceutical patents, software and intellectual property royalties, which also are often repatriated to structures domiciled in countries. presenting the most attractive taxation.
The Trump administration had already paved the way with taxation on GILTI, acronym – to pronounce “guilty– Low-taxed intangible global income, which provided for a rate of 10.5%, or half the tax rate in the United States, reduced to 21% after the major tax reform of 2017.
Towards a minimum rate of 21%?
The new administration, which wants to raise the corporate tax rate in the United States to 28%, would rather lean for an overall minimum rate of 21%. Moreover, while the previous administration had chosen a strictly national reform taxing the “intangible income” of only companies with American capital, the new administration seems to favor the track of a global agreement with the 140 participating States in the initiative launched by the Organization for Economic Co-operation and Development (OECD).
Olaf Schulz, the German Minister of Finance, has already declared himself “delighted” with this initiative and said he was convinced that it would put an end to “the global race to the bottom in terms of taxation” . He added that any deal should include rules on how to tax cross-border companies from digital tech giants, which is the second goal of international tax negotiations alongside ongoing at the OECD.
French Finance Minister Bruno Le Maire, who clashed with former US President Donald Trump’s administration over international taxation, in turn said he welcomed Janet Yellen’s proposal . “A global agreement on international taxation is now within reach. We must seize this historic opportunity, ”he said.
Behind the scenes, a source at Bercy told Reuters that Janet Yellen’s proposal would add impetus to the OECD negotiations. “We believe that the change in position of the American administration [qui s’était retirée en juin des négociations de l’OCDE] can breathe new life into negotiations with European countries with extremely low rates, ”added this source on condition of anonymity, in a transparent allusion to Ireland.
Bad news for Ireland
In contrast, Irish Finance Minister Paschal Donohoe expressed concern about how a global minimum rate would affect a smaller economy like Ireland’s, which has chosen a low-tax model (12 , 5%) to attract international investment. He admitted, however, “The catalysts for this change have been supercharged by the effect of the pandemic because major economies around the world are now focusing on ways to increase their tax revenues in the years to come.”
Finally, the Indo-American Gita Gopinath, chief economist of the International Monetary Fund (IMF), for his part expressed the Monetary Institution’s long-standing support for a minimum tax, deeming that tax optimization was “a great deal”. concern ”for the global economy.
However, it seemed unlikely that an agreement would be reached today and a draft final communiqué consulted by Reuters merely proclaimed: “We will continue our cooperation for a fair, sustainable and modern international tax system on a global scale. . “