Japan Tempers Expectations for Tax Breakthrough at G-7 Talks

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A Group of Seven meeting this week is unlikely to settle on a rate for a global minimum corporate tax, Japan’s Finance Minister Taro Aso said, sounding a note of caution before he and his counterparts gather in London.

Expectations of a preliminary deal between the world’s richest economies have risen after the Joe Biden administration made proposals on both a minimum rate and rules to reallocate tax revenues of the biggest multinational firms. France’s Finance Minister Bruno Le Maire said last week that the June 4-5 meeting must give momentum to clinching a global accord in mid-July.

Speaking to reporters on Tuesday, Aso said any agreement is unlikely to progress enough to allow for debate over figures for a rate for a minimum tax.

“I don’t think we’ll get down to numbers,” Aso said. “On where we might end up, it’s within the realm of forecasts, and we can’t count chickens before the eggs have hatched. We’re trying to bring up the minimum tax rate by a certain level, but by how much we’ll actually manage to agree on is still within the realm of projection.”

That measured view from Japan comes a day after Organization for Economic Cooperation and Development, which is running the tax negotiations between around 140 countries, said a final deal probably won’t be sealed until October.

“I think we have a deal in sight and hopefully it will happen this year,” the outgoing OECD Secretary General Angel Gurria said on Monday.

Gurria’s successor, Mathias Cormann, said on Tuesday he’s “quietly optimistic” there will be a deal. He spoke after talks between ministers within his organization.

Game Changer

“The approach taken by the Biden administration in relation to this issue has been a game changer,” Cormann said at a press conference in Paris. “With the level of good will that was demonstrated by all during the meeting today, we can continue to carry that forward and there will be an opportunity for a sensible consensus.”

In addition to a minimum corporate tax, the talks aim to change rules so the world’s biggest firms pay more in places where they operate. Negotiators are still working on criteria to determine which companies would fall in the scope of such a system, with Europeans insisting that all digital giants must be included if there is to be a deal.

Ireland, which has long used a 12.5% corporate tax rate to attract business investment, has pushed back against the proposals for a 15% minimum.

While the floor under discussion at the OECD would not force Ireland to change its own level, it would allow other countries to collect the difference. The Irish government said Tuesday any international agreement would have to accommodate its long-standing tax rate.

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