Global tax rules ‘within reach’ but ‘it’s now or never’ ahead of key OECD meeting, French finance minister says
- Members of the Organisation for Economic Co-operation and Development (OECD) will meet on Friday to discuss new global rules to share tax revenues
- The talks aim to close differences ahead of a meeting of Group of 20 finance ministers next week and heads of state in Rome at the end of October
Countries must resolve disagreements in the coming days over details of new global rules to share tax revenues from the world’s biggest companies and set a minimum rate, or the talks could founder, French finance minister Bruno Le Maire said.
Raising the alarm at the prospect that years of negotiations could miss a vital window of opportunity at a meeting on Friday of the 140 countries involved, the minister outlined his hopes for a compromise in a briefing with reporters on Tuesday.
“A definitive agreement on tax in the 21st century is within reach and it is now or never,” Le Maire said.
“Either we get an agreement in the coming days or it will be very difficult to recreate a political dynamic for a deal with all the technical parameters.”
The talks on Friday aim to close differences ahead of a meeting of Group of 20 finance ministers next week and heads of state in Rome at the end of October.
The OECD has warned failure would lead to a cocktail of unilateral digital levies and trade and tax disputes that could strip more than 1 per cent off global economic output annually.
The negotiations are split into two separate streams. The first, known as Pillar One, aims to reallocate some tax revenue from where multinationals book profits to where they have sales, while Pillar Two seeks to create a global minimum corporate rate.
The deepest difficulties are on Pillar Two as the minimum tax rules will hit economic models of some states, Le Maire said.
While he said there is a growing compromise on a 15 per cent rate, there is disagreement on how to exempt some activities from new rules.
To allow states to continue attracting investment in real economic activity, negotiators are working on how to make deductions from the calculation of minimum tax.
Le Maire said there is a proposal to reduce the amount subject to minimum tax by 7.5 per cent of tangible assets and by 10 per cent of payroll, with a 10-year transition period to bring the carve-out rate to 5 per cent.
What is at stake is a tax revolution that can end three decades of tax optimisation and three decades of industrial offshoring for which France has paid the price
France will make proposals for those carve-outs to be large enough and reduced at a pace that limits the hit for countries with low tax models, like Poland, Le Maire said.
On Pillar One, which is often referred to as digital taxation, states have still not decided how much profit should be shared for taxation after the July statement set a range of 20-30 per cent of profits above a 10 per cent margin.
Le Maire said countries including Brazil, Turkey and India want 30 per cent, while those where companies are typically headquartered, such as the United States, want the lowest possible rate. France is still proposing a compromise at 25 per cent.
“What is at stake is a tax revolution that can end three decades of tax optimisation and three decades of industrial offshoring for which France has paid the price,” Le Maire said.
