The Second Vice President and Minister of Economic Affairs and Digital Transformation, Nadia Calviño, together with her counterparts from Germany, France and Italy, representing the four largest economies in the euro zone, have signed a letter in which, hours before the start of the summit of finance ministers of the G7 , set their position in favor of a new international tax system more suitable for the 21st century, including a universal minimum corporate tax.
The letter, published by The Guardian before the meeting begins in London this Friday, which will be attended by representatives of Germany ( Olaf Scholz ), France ( Bruno Le Maire ) and Italy ( Daniele Franco ), along with their counterparts from the United States.
United States (Janet Yellen), United Kingdom ( Rishi Sunak ), Japan ( Taro Aso ) and Canada ( Chrystia Freeland ), adds pressure to reach a common position among the richest countries that will serve as the basis for reaching a subsequent agreement within the Organization for Cooperation and Development (OECD) and the G20.
In this sense, the four signatory ministers maintain that “now is the time to reach an agreement”, recalling that the introduction of a fairer and more efficient international tax system was already a priority before the current economic crisis and will be even more necessary. to get out of it.
In the first place, they consider that the crisis was “a blessing” for the technological giants, who obtained profits at levels not seen in any other sector of the economy, but who they accuse of not paying a fair share of taxes in the countries. where they operate and generate profits by developing their business online.
“Physical presence has been the historical base of our tax system. This base has to evolve with our economies transforming to digital economies. Like any other company, they should pay their fair share to finance the public good, at a level commensurate with their success. “, they point out.
Likewise, the finance ministers of the four major euro economies consider it “urgent” to implement an “efficient and fair” international tax system after the crisis has exacerbated inequalities, so they warn that people will not continue to accept that multinationals can avoid corporate taxes by shifting their profits to other jurisdictions.
“Tax dumping cannot be an option for Europe, nor for the rest of the world,” they warn, noting that this would lead to further decline in corporate tax revenue, wider inequalities and an inability to fund public services. vital.
On the other hand, the quartet considers it necessary to reestablish an international consensus on the main world problems for which it defends the role played by the OECD in the field of international taxation, noting that the proposals put forward by the ‘think tank’ are fair and balanced , both with regard to the taxation of the profits of the most profitable multinationals, in particular of the digital giants (called Pillar 1), and to the minimum taxation (Pillar 2).
“We can take advantage of this work. For the first time in decades, we have the opportunity to reach a historic agreement on a new international tax system that would involve all the countries of the world,” they declare.
The European ministers emphasize that the new US Administration, under the mandate of President Joe Biden, has eliminated the threat of a veto on this new tax system and consider that the United States proposal to set a minimum corporate tax at the global level of at minus 15% is a “promising” start and represents an important step in the direction of the proposal initially put forward by the four countries and taken up by the OECD.
“We therefore commit to defining a common position on a new international tax system at the G7 finance ministers meeting in London today,” the ministers say, confident that it will generate the necessary momentum to reach a global agreement in the G20 in Venice next July. “It is within our reach. Let’s make sure it happens. We owe it to our citizens,” they add.
Yellen’s first international ‘mission’
The G7 Finance Minister Summit, which will mark Janet Yellen’s first international mission as US Treasury Secretary and the first face-to-face meeting of ministers since the outbreak of the pandemic, will be chaired by Rishi Sunak, Minister of Finance. Finance and Head of the UK Treasury, as well as Andrew Bailey, Governor of the Bank of England, as hosts.
“It is fantastic to finally be able to have a face-to-face meeting with Secretary Yellen prior to the G7 financial meeting that begins tomorrow (today) in London. We will continue to work with our global partners to ensure an ecological and sustainable recovery,” Sunak stated after maintaining a meeting with his American counterpart this Thursday.
The British presidency has set as financial priorities for the 2021 program the protection of employment and support for the global economic recovery, as well as working to reach a global solution to the fiscal challenges created by the digitization of the economy, helping the economies to achieve their net zero emissions targets and provide the necessary support to the world’s most vulnerable countries. The meeting of the G7 finance ministers will be followed next week by the summit of the G7 leaders, which will meet from June 11 to 13.
In this way, despite the fact that the G7 does not have a formal role in the process of discussing the new international taxation , a pact within this group would be a powerful impulse to reach an agreement in the formal negotiations that are taking place. in this regard in the G20 and in the OECD.
In this sense, the United States has lowered its aspirations for a minimum corporate tax at the global level, reducing them from 21% to an effective rate of 15% in order to broaden the consensus in this regard.