European countries have confirmed their desire to agree a deal on a new global corporate tax regime in responseا The threat of the United States to impose $2 billion in tariffs on six countries, ahead of Friday’s crisis talks.
Washington announced duties on Austria, India, Italy, Spain, Turkey and the United Kingdom on Wednesday in response to its new digital taxes. But tariffs will be suspended for six months to allow time for an international agreement.
The United States had already imposed tariffs on France but suspended them for the same reason.
Talks between G7 finance ministers in London on Friday and Saturday will determine whether the world’s leading economies can formulate a common position on what shape the global corporate tax system will take. This could then shape the ongoing negotiations at the Organization for Economic Co-operation and Development in Paris and at the G-20 meetings this summer and in the fall.
Paris made clear Thursday that it will not withdraw its digital taxes until a new global tax on multinational corporations is agreed and implemented by the United States.
“We must withdraw [national] A French official said the tax is when there are new taxes in place “to avoid stopping tax collection.” Tech companies have benefited during [pandemic] crisis. . . We want to take [their] Excess profits which will be shared between the countries in which the company is headquartered and where its operations are located.”
The UK has repeatedly insisted that it will not sign any deal that does not give it the right to tax digital companies located in other countries.
But a Spanish budget ministry official emphasized common ground with Washington rather than threatening tariffs. “The fact that the United States has stopped increasing tariffs reflects its willingness to agree to an agreement on international taxes,” the department official said.
London – which hosts the G7 talks – and Paris fears that the Biden administration will not be able to pass any deal through Congress that would give other countries the right to tax a slice of the global profits of US tech giants.
This leaves negotiators with a delicate sequencing challenge: countries are not ready to withdraw their taxes until a new international order is in place.
The proposed system would create a new right to tax the profits of the largest multinational corporations based on where they generate their sales and an effective minimum global corporate tax rate of 15 percent, which would raise large sums of money in the United States.
US Trade Representative Catherine Taye said on Wednesday that imposing new tariffs and suspending tariffs for six months would allow more time for international tax talks to continue and give Washington the opportunity to preserve “the option to impose tariffs . .
US ambassadors around the world have been asked to rally support for Washington’s plan by emphasizing that President Biden sees it as a “high priority issue,” a person close to the negotiations told the Financial Times. Countries with objections are told by US representatives that “this is not a tax issue; this is about us.” [countries’] Link”.
The person said that while a deal appears imminent, there is some tension about the forum in which any agreement will be formally reached; The UK is ‘pressed hard’ to tie up the deal at the G7 summit in Cornwall next week.
But other G7 members including the United States, Italy and Japan are reluctant to go further than declaring a common position because the G20 is formally responsible for the negotiations and no deal should be seen as settled by the major economies alone.
G-20 finance ministers and central bank governors are due to meet in Venice in early July, and can agree to a global deal at that time.
Bruno Le Maire, the French finance minister, called on the G7 summit to support a global deal and said an agreement was “within hand”. “It is a question of financial justice and economic efficiency,” he said.
Additional reporting by Chris Giles in London, Emma Agyemang in Copenhagen, Em Williams in Washington, Danielle Dombe in Madrid and Victor Mallet in Paris