A global minimum corporate tax would generate around $150 billion in extra revenue for governments across the world, according to the official overseeing frenetic talks to get a deal between 139 countries in coming weeks.
“This is not an anecdotal amount,” Pascal Saint-Amans, director of the center for tax policy at the Organization for Economic Cooperation and Development (OECD), said on BFM Business television on Monday. “In some ways, this is the end of the work on regulating globalisation for greater tax justice.”
After seven years of technical work on an overhaul of international taxation, negotiators at the OECD will meet in Paris June 30 with the aim of making a proposal before a meeting of the Group of 20 industrialised nations in July. That follows an agreement between the Group of Seven to set a floor on corporate tax rates of “at least 15 per cent” instead of the current average of 6 per cent to 7 per cent.
The $150 billion estimate by Saint-Aman takes into account the OECD deal on minimum tax, as well as a revised version of existing US measures on taxing foreign profits known as GILTI.
Alongside negotiations on a global minimum rate, the OECD is also working on a system to divide up between governments the rights to tax multinationals, particularly tech firms. The G7 proposed applying new rules to the “largest and most profitable” businesses, but that has raised concerns that Amazon.Com would not be included because of its thin margins.
Saint-Amans said those concerns are a “false debate,” because the OECD plans to segment its operations to isolate the online retailer’s high-margin cloud services operations. “The draft agreement foresees that cloud profits would be part of the solution and shared out between states,” Saint Amans said.
He added that political momentum to stop firms parking profits in tax havens, and a need for governments to repair finances after the pandemic, mean that a G-20 deal is possible.
“It’s a month already that we’ve had little sleep, and the next two weeks will be very important,” Saint-Amans said. “Common sense is difficult for the international community, but I think we can get there.”
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