Donald Trump is gone and with him (to some extent) unilateralism. Biden came up with (to some extent) multilateralism and the search for compromise in financial and trade disputes with European friends. It took a change of administration in Washington and a pandemic that landed the world’s economies in the prisons of the G-7 countries to reach an agreement on a global minimum corporate tax after more than a decade unsuccessful negotiations so far.
But as someone from Ernest Hemingway said, you go bankrupt little by little, and then all of a sudden. The same is true of the compromise reached yesterday in London by the finance ministers of the Group of Seven (United States, Canada, France, Italy, Germany, United Kingdom and Japan), ahead of the leaders’ meeting scheduled for Friday. see you Monday next week. in Cornwall. Economic emergencies (the need to foot the bill for the pandemic) have made what until recently seemed impossible, easy and possible.
The success of the agreement depends on its ratification by the G-20, the Organization for Economic Co-operation and Development and the United States Congress.
The Big Seven announced a commitment to establish a minimum global corporate tax of 15% (lower than what some would like), and for multinationals in the technology and digital sector (Amazon, Google, Facebook…) to pay the fees. Not only where they are based (often tax havens) but also in the countries in which they operate and generate profits. The additional revenue – the Biden administration estimates $ 500 billion for the United States alone over the next decade – will largely go to fund investment and infrastructure programs to get out of the crisis.
UK Finance Minister Rishi Sunak called the deal “historic”. But before the adjective becomes viable, it will have to overcome a series of hurdles, starting with the approval of the U.S. House of Representatives and Senate, where Republicans are reluctant and could block, and continuing its approval during the elections. UN summits. States: G-20 in Venice in July, OECD in October. Because in the end, the countries that signed the deal yesterday already have corporate taxes of over 15% for the plan to be effective, it is essential that others sign, including China, Brazil and Russia.
As a first step, the Biden administration insisted on an overall partnership rate of 21%, closer to the 28% that the United States wants to put in place (up 7% from the current rate), in order to discourage businesses in the country from setting up. Elsewhere, with a lower tax burden. France has also spoken out in favor of a rate above 15%, but other club members have successfully argued that this is not a realistic goal if as many governments as possible are going to jump on the bandwagon. , given that in Ireland, for example, the corporation tax is 12.5%.
“The goal is to prevent a race between countries to see who offers the lowest taxes and to get a fair deal for the middle and working classes in the United States and the world at large,” said the US Secretary of the Treasury. Janet Yellen. “This is excellent news for justice and solidarity in the digital age, and very bad news for tax havens, where companies will not be able to evade their obligations, create subsidiaries and record their profits there. where the pressure is least, ”he said. German Finance Minister Olaf Schulz in the balance Paolo Gentiloni, European Commissioner for Economic Affairs, promised that “Brussels will do whatever is necessary for the agreement to succeed”.