“Optimism” about the general corporate tax regime around the G7 deal
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The UK is “cautiously optimistic” that the group of advanced G7 countries can agree on a global agreement on the taxation of multinationals after heated discussions in recent days.
Finance ministers are due to meet in London on Friday and Saturday, and will announce to the FT that they have announced the principles of a new tax system on international companies.
An ally of UK chancellor Rishi Suna, who will hold the talks, said they were “cautiously optimistic” that a deal could be reached, adding that “we are feeling well”.
The proposed regime would create a new right for new countries to tax the profits of the largest multinationals based on where they sell and would raise the overall effective corporate tax rate of 15%, which is a large amount of money in the US.
In recent days, Washington has stepped up pressure to reach an agreement. U.S. ambassadors around the world have been told to support the plan, stressing that President Biden considers it a “high-priority issue,” a person close to the negotiations told the Financial Times. U.S. representatives tell troubled countries “this is not a tax issue; this is about us [countries’] relationship “.
On Wednesday, Washington announced revenge rates on the six countries that have introduced their digital taxes, in addition to the canon it has already applied in France for the same reason.
However, the implementation of this punitive measure was suspended for six months when US Trade Representative Katherine Tai said she was trying to leave room for an international agreement.
A spokesman for the Spanish budget ministry said: “The US’s cancellation of the tariff increase reflects its willingness to agree on a deal.”
Countries like the UK and France have refused to suspend digital taxes until the US not only agrees to the deal but forces it through Congress.
Paris said on Thursday it would not remove the tax until the U.S. introduces a new global tax.
“We should retire [national] when new taxes are imposed ”to avoid a disruption in tax collection, a French official said. “Technology companies have benefited [pandemic] crisis. . . We want to take it [their] the excess profits will be distributed among the countries where the company is headquartered and whose operations are located. “
This leaves negotiators with a tricky sequencing challenge: countries do not want to get rid of their taxes until a new international system is put in place.
After any agreement this weekend will come a more detailed discussion among G7 leaders at a summit in Cornwall a week later.
The rest of the sticky points were that the rules would apply to the exact definition of the group of multinationals and whether they would pay taxes based on where they make sales or profits.
There is some tension in which forums the agreements would be officially held, depending on the person mentioned who knew the talks.
The UK is “working very hard” to reach an agreement on the summit of G7 leaders, but other G7 members such as the US, Italy and Japan do not want to go further than announcing a common position which are – and any agreement should not be seen to be properly resolved only by large economies.
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Additional report by Daniel Dombey in Madrid
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