According to people familiar with the negotiations, the UK is “cautiously optimistic” that after intense discussions in recent days, the Group of Seven (G7) developed countries can agree on the outline of a global agreement on taxation of multinational companies.
People familiar with the matter told the Financial Times that the finance ministers are scheduled to meet in London on Friday and Saturday and are preparing to announce that they have agreed on the principles of a new international corporate tax system.
An ally of the British Chancellor of the Exchequer Rishi Sunak who will chair the discussion said they are “cautiously optimistic” about a possible agreement, adding that “we feel good about it.”
The proposed system will create a new right for countries to tax the profits of the largest multinational companies based on their sales locations and set the world’s lowest effective corporate tax rate to 15%, which will raise a lot of money in the United States.
In recent days, there has been increasing pressure from Washington to reach an agreement. A person familiar with the negotiations told the Financial Times that U.S. ambassadors around the world were told to win support for the plan, and they emphasized that President Biden considered this to be a “primary issue.”The representative of the United States told the opposing countries, “This is not a tax issue; this is about our [countries’] relationship”.
On Wednesday, Washington announced retaliatory tariffs on six countries that have introduced their own digital taxes. In addition, it has imposed tariffs on France for the same reasons.
However, U.S. Trade Representative Katherine Tai (Katherine Tai) stated that the country has suspended the implementation of punitive measures for six months in order to make room for an international agreement.
A Spanish budget official said: “The fact that the United States has suspended tariffs reflects its willingness to reach an agreement.”
Countries including the United Kingdom and France refused to abolish their own digital taxes until the United States not only agreed to an agreement, but also forced it to pass Congress.
Paris made it clear on Thursday that it will not withdraw taxes until the United States implements a new global tax.
“We should withdraw [national] A French official said that taxes are levied when there are new taxes” to avoid tax interruption. “Technology companies benefit from the epidemic. [pandemic] crisis. .. We want to take [their] Excess profits will be shared between the country where the company is located and the country where it operates. “
This presents a subtle sequencing challenge for the negotiators: until the new international system is in place, countries are unwilling to withdraw their taxes.
After any agreement is reached this weekend, G7 leaders may have more detailed discussions at a summit in Cornwall a week later.
The remaining crux lies in the detailed definition of the multinational group of companies to which the rules apply, and whether they will pay taxes based on the location of sales or profit.
According to the above-mentioned people familiar with the matter, there are some tensions in which forum any agreement will be formally reached.
At the G7 summit, the United Kingdom “vigorously pushed” to reach an agreement, but other G7 members, including the United States, Italy, and Japan, were reluctant to go further apart from declaring a common position, because the G20 was officially responsible Negotiations and any transactions under the auspices of the OECD should not be seen as being settled only by large economies.
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Additional reporting by Daniel Dombey in Madrid