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The eyes are already on the Venice Arsenal which will host the G20 Economy Ministers from 8 to 11 July with the hope of endorsing the result just achieved by the Seven. But today’s, although it is only a first step, is already unanimously hailed as a “historic agreement”. The G7 of Finance (Europe plus UK, USA and Canada) met in London and reached an agreement for the introduction, country by country, of a minimum global taxation of at least 15% aimed at multinationals and in particular the giants of the web . Only a few years ago such a compromise would have been branded as a utopia, but the turning point, at least on the political level, had been in the air for days. And the decision of the United States to introduce and immediately suspend the new duties to six countries for six months, including Italy (on about 380 million goods destined for the United States) in response to the digital taxes introduced at national level, was the further confirmation. As the Italian Treasury Minister Daniele Franco explained, the agreement just reached rests on two pillars: a minimum rate of “at least 15%” for all multinationals and the intention to tax 20% of the quota exceeding 10 % of profits in the countries where sales are made, net of
nominal domiciliation in any tax haven. “After years of discussions, G7 finance ministers have reached a historic agreement to reform the global tax system to fit the global digital age,” said British Chancellor of the Exchequer, Rishi Sunak.
The agreement, as mentioned, is only a first and above all political step to harmonize corporate taxation at an international level in an attempt to counter tax avoidance and profit shifting, the transfer of profits of multinationals to countries where they enjoy favorable taxation. It will then have to be extended and shared first of all to the countries that are part of the G20 and subsequently brought to the OECD. The momentum is still encouraging on a political level, but concretely the road still appears long. The ministers of Italy and France make no secret of it: “Today’s agreement unlocks a debate that lasted eight to nine years. This new form of taxation will be operational in a few years, there is no technical time to do it sooner ”, said Daniele Franco. For Bruno Le Maire “this is a starting point, in the coming months we will work to increase the rate further”. For the US Treasury Secretary Janet Yellen the discussions are still “far from over”.
The path is long and not without obstacles. Indeed, there are still many technical and formal aspects to be clarified and discussed. The first crack in the European front came from Dublin which immediately announced its intention to raise the question of “legitimate tax competition”. Not surprisingly: Ireland is considered to all intents and purposes a tax haven within the European Union, first choice together with Luxembourg and the Netherlands of the large multinationals to establish their headquarters. Dublin applies a 12.5% tax rate on commercial profits. Italy loses every year the possibility of taxing over six billion euros which instead go to Ireland. The effects can be seen in the attractiveness of investments: if Rome attracts foreign direct investments equal to 19% of its GDP, in Ireland they are equal to 311%. The Irish Minister of Finance, Paschal Donohoe promises battle with a tweet in which, while taking note of the result achieved, he remembers that “there are 139 countries at the OECD table, and any agreement will have to meet the needs of small and large, developed and way of development “.
It must be said, however, that the tax rate set at 15% (effective, not legal) was the lowest of the various hypotheses under discussion: there was talk of one at 21% (in the wishes of the United States) and even 25 %. According to a study by the European Tax Observatory, with a minimum rate of 15%, multinational companies would allow Italy to increase its tax revenue by 2.7 billion euros in 2021. With a rate of 21% it would rise by as many as 7 , 6 billion and over 11 billion with a 25%. The same goes for Europe: with a minimum tax of 25%, the tax revenue on corporate income in the Union would increase by 170 billion in 2021, at 15% it would drop to 50 billion.
“15 percent seems too low to me,” said the director of the EU Observatory and Professor of Economics at Berkeley Gabriel Zucman a few days ago. “If there was an international agreement on a minimum rate, it would be very important in and of itself regardless of the rate” and “even if it were 15 percent, it could pave the way for higher rates in the future.” The agreement of the G7 goes in this direction, and the use of the formula “at least 15%” saves the form above all, leaving open gaps to take it higher.
On the other hand, the 15% share represents a good point of decline for US-branded Big Tech. Amazon pays an overall global tax rate (i.e. which includes state, federal and foreign taxation) of 11.8%, Apple of 14.4%, Alphabet of 16.2% and Facebook of 12.2%. Obviously negligible figures compared to the profits accrued when you consider that France has a corporate tax rate of 32%, Portugal at 31.5%, Germany at 29.9%. On average, European OECD countries currently apply a corporate income tax rate of 21.9%. For this reason, Google and Facebook have also expressed themselves – after Amazon – in favor of the agreement reached at the G7 in London. “We strongly support the work done to update international tax rules – said a Google spokesperson – we hope that countries will continue to work together to ensure that a balanced and lasting agreement is concluded soon”. Facebook “has long called for a reform of global tax rules and we welcome the important progress made at the G7,” echoed Nick Clegg, the social network’s vice president of global affairs.
But it is clear that any international agreement will have to end with a compromise accepted by all, and there is not only the Irish resistance to overcome. Another controversial topic will be the process of defining large global companies to be subject to minimum taxation. The OECD has counted more than two thousand, while the United States only a hundred and would like to keep the banks out. And then an agreement must be found on the criteria for identifying under-taxed profits in the consolidated financial statements of companies. As stated in the final statement of the G7, “there is a commitment to reach a fair solution on the assignment of taxation rights”. A negotiation that will go hand in hand with the dismantling of digital taxes introduced by several countries (such as France and Italy) at a national level. The French minister Le Maire immediately made it clear that the minimum rate will naturally absorb the web e digitaltax existing today. And it is put in black and white in the final communiqué: “We will ensure adequate coordination between the application of the new international tax rules and the elimination of all taxes on digital services, and other relevant similar measures, on all companies”.
Italian Prime Minister Mario Draghi welcomed the news of the agreement reached: “I greet with great satisfaction the agreement on the taxation of multinationals reached today in London by the finance ministers of the G7. It is a historic step towards greater equity and social justice for citizens ”, declared the premier who aims to finalize the agreement as early as July in Venice during the G20 of which Italy holds the presidency. Like him, many other leaders, starting with the EU Commissioner for Economic Affairs Paolo Gentiloni, celebrated the result achieved: “Today in London we have taken a big step towards an unprecedented global agreement on the reform of corporate taxation. This was a very positive meeting that allowed us to build bridges on crucial issues ”.
“Very good news for justice and solidarity and bad news for tax havens,” German minister Olaf Scholz told the Dpa. “Historic G7 agreement on comprehensive corporate tax reform today. This is a huge leap forward. The next step is to have the G20 and OECD countries on board, ”European Council President Charles Michel tweeted. In short, a lot of enthusiasm, perhaps too much, reading the tweet Ludovic Subran, chief economist of Allianz, the largest insurance group in the world: “If no one complains, then it’s just a show”.