‘Optimism’ over the G7 agreement on the global corporate tax regime

The UK is “cautiously optimistic” that the G7 group of advanced nations can agree to the broad outlines of a global agreement on the taxation of multinationals after intense discussions in recent days, according to people with knowledge of the discussions.

Finance ministers will meet in London on Friday and Saturday, and are ready to announce that they have accepted the principles for a new international corporate taxation system, people told FT.

An ally of Rishi Sunak, the UK’s chancellor, who will be organizing the talks, said they were “cautiously optimistic” that an agreement could be made, adding that “we feel good”.

The proposed regime will both create a new right for countries to tax the profits of the largest multinationals based on where they make their sales and a globally effective minimum tax rate of 15 percent, which would raise significant sums. of money in the United States.

In recent days Washington’s pressure to agree to a deal has intensified. U.S. ambassadors around the world have been told to gain support for the plan underlining what President Biden sees as a “priority issue,” a person close to the talks told the Financial Times. U.S. officials told countries with objection that “this is not a tax issue; this is about our [countries’] report “.

Wednesday Washington announced revenge rates for six countries that have introduced their own digital taxes, in addition to the tax it has already applied to France for the same reason.

However, he suspended the implementation of the punitive measure for six months in what Katherine Tai, the U.S. trade representative, said was an attempt to leave room for an international agreement to be reached.

An official from the Spanish budget minister said: “The fact that the United States has suspended the tariff increase reflects its willingness to reach an agreement.”

Countries including the United Kingdom and France have refused to cancel their own digital taxes until the US not only agrees to an agreement, but has also been forced to do so by Congress.

Paris said Thursday it would not withdraw its tax until a new global tax was introduced by the United States.

“It simply came to our notice then [national] a tax when there are new taxes in place “to avoid a pause in tax collection,” said a French official. [pandemic] crisis. . . We want to take it [their] excessive profit and which will be shared between the countries where the company is based and where its operations are located. “

This leaves negotiators with a delicate sequencing challenge: countries are unwilling to withdraw their own taxes until a new international system is in place.

Each agreement this weekend will be followed by a more detailed discussion between G7 leaders at their summit in Cornwall a week later.

The remaining points of attachment concern the detailed definition of the group of multinationals to which the rules apply, and whether they would pay the tax based on where they make sales or profits.

There is some tension over whether any agreement would be officially made, according to the person mentioned above with knowledge of the discussions.

The UK is “pushing extremely hard” to tie the deal to the G7 leaders’ summit, but other G7 members, including the US, Italy and Japan, are reluctant to go any further. than announcing a common position because the G20 is officially in charge of negotiations – which are conducted via OECD auspices – and any agreement should not be seen as the only one by the big economies alone.

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Additional reports from Daniel Dombey in Madrid

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