Global tax reform approved by 130 countries

Global tax reform approved by 130 countries

Facebook Inc has 130 countries and jurisdictions. And Alphabet Inc. With the rules for sharing plunder from multinational companies such as Google, as well as approving the setting of minimum tax rates for companies, the world has taken a major step towards a drastic change in global taxation.

After years of failure and setbacks, the deal mediated by negotiations at the Organization for Economic Co-operation and Development prepares a group of 20 finance ministers to, in principle, approve the agreement at a meeting in Venice next week. I will arrange it.

This could mean that rules will come into force in 2023 to reduce tax avoidance by forcing multinationals to pay an effective tax rate of “at least 15%” and increasing tax revenues from foreign companies in smaller countries. There is.

The tax will apply to approximately 100 multinationals, including digital giants. Treasury officials said the number of affected Japanese companies would be “limited.”

The Paris-based OECD said in a statement Thursday that a “small group” of the country “has not yet participated” in the plan. This includes Hungary and Ireland, which attracts some of the world’s largest companies with low taxes.

According to the OECD, some of the major countries that were question marks agreed to the terms, including India, China and Turkey. Technical details may leave room for further concessions to the developing economy.

Another Thursday’s broad agreement may have proved deadly to efforts to reshape tax law, given the short chances of getting a global deal approved by the U.S. Congress and other parliaments. Avoid stumbling.

US Treasury Secretary Janet Yellen praised the news, calling it “a historic day of economic diplomacy.”

Yellen said in a statement Thursday that the international “race to the bottom” of corporate tax rates, which robbed the country of the income needed for infrastructure, education and other needs, was nearing its end.

“In the United States, this agreement guarantees that businesses will bear a significant portion of that burden,” she said. “We now have the opportunity to build global and domestic tax systems that allow American workers and businesses to compete and win in the global economy.”

Ireland and Hungary did not participate in the agreement, which could cause problems for the European Union to implement the plan. Ireland’s Treasury Minister Paschal Donohoe said last month that trading at the lowest interest rates must meet the needs of “big and small countries in developed and developing countries.”

France’s Treasury Minister Bruno Le Maire spends next week before the G20 meeting convincing European countries to “make the necessary efforts to join a historic agreement that brings together the states of the planet very broadly.” He said he would double his efforts.

Resolving this issue has become increasingly urgent for the global economy after disagreements over taxation and minimum tax rates on tech companies were caught up in trade conflicts last year. The promise of nearly $ 150 billion in additional income to the government, as most countries face huge budget shortages in the wake of the Covid-19 pandemic, also helped reach an agreement.

The challenge facing trading proponents is to force developing countries to apply for wholesale to what was first mediated by the Group of Seven. Small clubs with affluent economies, including the United States, United Kingdom and France, agreed in London last month on a rough outline of the two pillars of the OECD negotiations: a mechanism to share the right to tax “at least 20%” of the above profits. 10% margin for the largest multinational companies. Minimum corporate tax of at least 15%.

As it stands, the OECD document released Thursday made some changes to these proposals, and the amount of redistributed profits must be between 20% and 30% of residual profits above the 10% margin. It has to say that it has the potential to increase the profits of small economies.

It also states that companies with revenues in excess of € 20 billion ($ 24 billion) will be subject to the new rules on taxable locations. In concessions to economies of scale, the Comprehensive Framework agreed to review the terms seven years later and lower the threshold to € 10 billion.

According to OECD conditions, even the smallest economies will benefit from lower thresholds to allow multinational corporations to be taxed.

According to Le Maire, the deal solves another problem by ensuring that Inc. is taxed in its local jurisdiction, even if it has a rate of return of less than 10%. To do. In short, the more profitable cloud services businesses of online retailers are subject to a new rule that the OECD calls “segmentation,” which is “exceptional” when a company unit meets revenue and profit thresholds. May apply in “Situations”.

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Tax treaties by G7 countries reveal rifts in European policy

Tax treaties by G7 countries reveal rifts in European policy

The global agreement on corporate tax seems to bring the deep-rooted European Union battle between big countries such as Germany, France and Italy to Ireland, Luxembourg and the Netherlands to the climax.

Small EU member states, at the heart of a long-standing struggle for a favorable tax system, welcomed the Group of Seven agreement on June 5 with a minimum corporate tax rate of 15%, but some critics said. We anticipate that there will be problems in its implementation.

The European Commission, the EU’s executive body, has long struggled to reach consensus within the EU on a common approach to taxation. This freedom has been enthusiastically protected by all 27 member states, large and small.

“Traditional EU tax holdouts try to keep the framework as flexible as possible and allow the business to continue more or less as usual,” said Bruegel’s Rebecca Christie, a Brussels-based think tank. Stated.

Ireland’s Treasury Minister and Eurogroup Chairman Paschal Donohoe warmly welcomed the deal by wealthy G7 countries.

“Any agreement needs to meet the needs of large and small countries,” he wrote on Twitter, pointing out the “139 countries” needed for a broader international agreement.

The Dutch Deputy Minister of Finance Hans Wilbrief wrote on Twitter that he is in favor of the G7 plan and has already taken steps to prevent tax avoidance.

EU officials have personally criticized countries such as Ireland and Cyprus, but working on them in public is politically criticized. Brock’s “non-cooperative” tax center blacklist does not mention EU shelters because of its standards.

These have prospered by offering low rates to businesses through so-called letterbox centers.

“European tax havens aren’t interested in making concessions,” said Sven Giegold, a member of the European Parliament’s Greens, who is lobbying for more equitable rules.

Nonetheless, Luxembourg’s Treasury Minister Pierre Gramenha welcomed the G7 agreement and added that it would contribute to broader debate towards a detailed international agreement.

Irish Finance Minister Paschal Donohoe, Day 2 of the G7 Finance Ministers’ Meeting in London on Saturday | POOL / VIA AFP-JIJI

Ireland, Luxembourg and the Netherlands welcomed a long war for reform, but Cyprus’ response was more cautious.

Finance Minister Constantinos Petrides of Cyprus told Reuters that “we need to recognize and take into account small EU member states.”

Even France, a G7 member, may find it difficult to fully adapt to the new international rules. “Big countries like France and Italy also have tax strategies that they are determined to protect,” said Christie.

The Tax Justice Network ranks the Netherlands, Luxembourg, Ireland and Cyprus as the most famous shelters in the world, but also includes France, Spain and Germany.

The European sector soared in 2015 after a document called “Luxembourg” showed how Luxembourg helped businesses profit with little or no taxes.

It adopted rules to prevent illegal state support for businesses and cracked down on Marguerite Vestager, the EU’s strong antitrust officer, who claimed that such a tax system was equivalent to an unfair subsidy. Caused.

Vestager has begun investigating Finnish paper packaging company Huhtamaki on refund taxes to Luxembourg and the Dutch tax treatment of InterIKEA and Nike. The Netherlands and Luxembourg have denied that the agreement violates EU regulations.

But she faced setbacks, as last year when a general court ordered iPhone maker Apple to pay 13 billion ($ 16 billion) Irish retroactive taxes. This ruling is currently being appealed. Vestiger’s order for Starbucks to pay millions of dollars in Dutch taxes has also been rejected.

Despite these defeats, the judge agreed with her approach.

A European Commission spokesman said, “Fair taxation is a top priority for the EU.”

The Netherlands, in particular, has emphasized its willingness to change after criticizing multinational corporations for their role as a pipe to transfer profits from one subsidiary to another with little or no tax.

In January, a rule was introduced to tax royalties and interest payments sent by Dutch companies to jurisdictions with a corporate tax rate of less than 9%.

“There is a growing demand for fairness,” said Paul Tan, a member of the European Parliament in the Netherlands. “And now it is tied to the need to fund the investment.”

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G7 countries “only 1 mm” from historic tax treaties

G7 countries “only 1 mm” from historic tax treaties

France and Germany are approaching a historic agreement on Friday after a day’s talks in London that some of the world’s wealthiest countries will close their network to large companies that do not pay fair taxes. Stated.

The finance ministers of seven wealthy countries have met in person for the first time since the COVID-19 pandemic began.

Wealthy countries have struggled for years to agree on ways to collect more taxes from large multinationals such as Google, Amazon and Facebook.

France’s Finance Minister Bruno Lemer told the BBC, “We have only one millimeter left to reach a historic agreement.”

Germany’s finance minister, Olaf Scholz, said he was “absolutely confident” that an agreement would be reached by the end of Saturday’s meeting.

“We will have a contract that will really change the world.”

Now that the pandemic of the new coronavirus has emptied its financial resources, the deal could raise tens of billions of dollars in government.

However, there remains a great deal of disagreement about the minimum tax rate to be levied on companies and how to develop rules to ensure that large, low-margin companies such as Amazon face tax increases.

The United States is proposing a global corporate tax rate of 15%, which is above the levels of countries such as Ireland but below the G7 minimum.

Lemaire said this was “just a starting point.”

“We need something we can trust,” he added. “We are still working on this very tricky point of rate.”

The UK said the tax talks were productive, but disagreements still remain. The discussion continues with a supper.

Due to COVID-19 restrictions, the ministerial delegation has been reduced. The seating arrangement of the ornate Lancaster House, built in the 19th century, has been redesigned with the help of health authorities.UK Finance Minister Liss Snack welcomes leaders with elbows instead of shaking hands

Snack, who has emphasized the importance of meeting in person to reach an agreement, told ministers earlier that other countries in the world are watching the progress.

“We can’t continue to rely on the tax system that was mostly designed in the 1920s,” he said.

Lemaire said the deal would signal an important signal that the G7 (US, Japan, Germany, UK, France, Italy and Canada) could still be influential.

At the G20 conference in Venice in July, any transaction will require broader global approval.

A source close to the negotiations said, “It will be talked about soon.” “The United States, like us, maintains their position.”

Japan’s finance minister, Taro Aso, said Monday that he did not expect to reach an agreement this week on a particular minimum tax rate.

The US Treasury hopes that a more complete agreement will be reached when Mr. Byden and other government leaders meet in the UK from June 11th to 13th.

Mr Biden had planned to raise the US domestic corporate tax rate to 28%. But on Thursday, he proposed leaving the tax rate unchanged at 21%, but offered a deduction and a 15% tax floor after deduction to gain Republican support for the new spending.

But just as important for the UK and many other countries, large multinationals have more taxes where they make profits and where they headquarter, as well as where they sell. Is to pay.

“Their business model gives them the opportunity to avoid far more taxes than any other company,” Scholz said.

The United States wants to abolish the digital service taxes imposed by the United Kingdom, France and Italy, and sees the tax system used by European companies as unfairly targeting US high-tech giants.

UK, Italy and Spain’s exports of fashion, cosmetics and luxury goods to the United States will face a new 25% tariff later this year, if not compromised.

The United States is proposing to impose a new global minimum tax only on the 100 most profitable companies in the world.

The UK, Germany and France are tolerant of this approach, but want to keep companies like Amazon, which have lower profit margins than other tech companies, from escaping the net.

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Complaints filed over Uniqlo and other US countries in France …

Complaints filed over Uniqlo and other US countries in France …

Aid groups for Uighurs and other parties have filed complaints in a Paris court against four fashion giants, including Uniqlo in Japan, on suspicion of forced labor by Uighurs in China.

According to media organizations such as Les Echos, the four are French clothing retailer Uniqlo, Zara fashion chain operator Inditex in Spain, shoe brand Skechers USA Inc., and French apparel giant SMCP.

In a complaint released Friday, aid groups and their partners have accused the four of concealing crimes against humanity, benefiting from the forced labor of Uighurs, a minority in China.

According to complaints, the four will continue to sell cotton-based products made in China’s Xinjiang Uygur Autonomous Region.

On Thursday, UNIQLO’s parent company, Fast Retailing Chairman Tadashi Yanai declined to comment on the human rights situation in the Arie Uighur region.

“We want to be politically neutral,” Yanai announced at a press conference about Fast Retailing’s earnings. He also did not mention whether his group used cotton produced in the area.

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