June 13, 2021

ask for a minimum global corporate tax


MADRID

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The Second Vice President and Minister of Economic Affairs and Digital Transformation, Nadia Calviño, together with her counterparts from Germany, France and Italy, representing the four largest economies in the euro zone, have signed a letter in which, hours before the start of the G7 Finance Ministers Summit, set their position in favor of a new international tax system more suitable for the 21st century,
including a universal minimum corporate tax.

The letter, published by ‘The Guardian’ before the meeting that will be attended by representatives of Germany begins this Friday in London (Olaf Scholz), France (Bruno le maire) and Italy (Daniele franco), along with their US counterparts (Janet yellen), UK (Rishi Sunak), Japan (Taro Aso) and Canada (Chrystia freeland), adds pressure to reach a common position among the richest countries that will serve as the basis for reaching a subsequent agreement within the Organization for Cooperation and Development (OECD) and the G20.

In this sense, the four signatory ministers maintain that “now is the time to reach an agreement ”, recalling that the introduction of
a fairer and more efficient international tax system
It was already a priority before the current economic crisis and it will be even more necessary to get out of it. First, they consider that the crisis was
“A blessing” for the tech giants
, which obtained profits at levels not seen in any other sector of the economy, but which they accuse of not paying a fair share of taxes in the countries where they operate and generate profits by developing their business online.

“The physical presence has been the historical basis of our system tax. This base has to evolve with our economies transforming to digital economies. Like any other company, they should pay their fair share to finance the public good, at a level commensurate with their success, “they say.

Likewise, the finance ministers of the four major euro economies consider it “urgent” to set up an international tax system “Efficient and fair” After the crisis has exacerbated inequalities, they warn that people will no longer accept that multinationals can avoid corporate taxes by shifting their profits to other jurisdictions.

“The tax dumpingl
may not be an option for Europe
Nor for the rest of the world, ‘they warn, noting that this would lead to further decline in corporate tax revenue, wider inequalities and an inability to fund vital public services.

“For the first time in decades, we have the opportunity to reach a historic agreement on a new international tax system that would involve all the countries of the world”

On the other hand, the quartet considers it necessary to reestablish an international consensus on the main world problems for which it defends the role played by the OECD in the field of international taxation, noting that the proposals put forward by the ‘think tank’ are fair and balanced , both with regard to the taxation of the profits of the most profitable multinationals, in particular of the digital giants (called Pillar 1), and to the minimum taxation (Pillar 2).

“We can take advantage of this work. For the first time in decades, we have the opportunity to reach a historic agreement on a new international tax system that would involve all the countries of the world ”, they declare.

European ministers emphasize that the new US Administration, under the mandate of the President Joe Biden, has removed the threat of a veto on this new tax system and they consider that the United States’ proposal to set a global minimum corporate tax of at least 15% is a “promising” start and represents an important step in the direction of the proposal initially raised by the four countries and assumed by the OECD.

“Therefore,
we are committed to defining a common position
on a new international tax system at the meeting of finance ministers of the G7 in London today, “say the ministers, trusting that it will generate the necessary momentum to reach a global agreement at the G20 in Venice next July. «It is within our reach. Let’s make sure it happens. We owe it to our citizens», They add.

The G7 Finance Minister Summit, which will mark Janet Yellen’s first international mission as US Treasury Secretary and the first face-to-face meeting of ministers since the outbreak of the pandemic, will be chaired by Rishi Sunak, Minister of Finance. Finance and Head of the UK Treasury, as well as Andrew Bailey, Governor of the Bank of England, as hosts.

Despite the fact that the G7 does not have a formal role in the new tax system, a pact in this group would provide a powerful impulse to reach an agreement in the G20 negotiations and in the OECD.

“It’s great to finally be able to have a face-to-face meeting with Secretary Yellen before the G7 financial meeting that starts tomorrow (today) in London. We will continue to work with our global partners to ensure an ecological and sustainable recovery, “said Sunak after meeting with his American counterpart on Thursday.

The British presidency has set as financial priorities for the 2021 program the protection of employment and support for the global economic recovery, as well as working to reach a global solution to the fiscal challenges created by the digitization of the economy, helping the economies to achieve their net zero emissions targets and provide the necessary support to the world’s most vulnerable countries.

The G7 Finance Ministers Meeting It will be followed next week by the summit of the G7 leaders, which will meet from June 11 to 13.

Thus, despite the fact that the G7 does not have a formal role in the discussion process of the new international taxation, a pact within this group would be a powerful impulse to reach an agreement in the formal negotiations that are taking place on this matter in the G20 and the OECD.

In this sense, the United States has lowered its aspirations for a minimum corporate tax at the global level, reducing them from 21% to an effective rate of 15% in order to broaden the consensus in this regard.

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