Global tax negotiators work hard to persuade countries that insist
Negotiators in Paris are trying to persuade insistent countries to sign a Global Corporate Tax Agreement This week, they are increasingly worried that the compromise needed for countries to join will weaken the final agreement.
According to some sources, it is widely expected that tax havens and investment centers such as Ireland, Switzerland and Barbados will refuse to sign the agreement. The finance ministers of the G20 group of countries will discuss the details of these proposals at a summit in Venice next month.
Those who understand this process have greater hopes of reaching an agreement, especially hope that China will agree to participate, but warn that time is running out.
A negotiator told the Financial Times: “I don’t think it will fail… There are still some uncertainties, but we are not far from reaching an agreement.”
Another person close to the negotiations who has been worried about China’s involvement last week said that the signs are now more positive, but warned that the negotiations may be the last chance to reach a global agreement that will stop decades of disputes over the global tax system. .
The European official said: “If we cannot reach an agreement on the G20, then we will most likely have to restart 20 years of negotiations on this issue.”
He stated that there was a risk of dilution in the deal to the point that it became meaningless, and pointed out the high risks involved: “If we can reach an agreement, then this will be a huge victory, showing that the biggest issue is It is possible to engage in international diplomacy.”
A third official said that China is still the main sticking point, but the optimism of the negotiators is more optimistic than a few weeks ago.
China and many Eastern European countries complain that the transaction will disrupt existing tax arrangements that provide manufacturers with investment incentives through corporate taxes to build factories and machinery at a tax rate lower than the proposed minimum of 15% in the world.
These countries are not regarded as tax havens, and multinational companies use low tax rates to release free profits in these countries. People close to the talks said that Eastern European countries have been exempted from manufacturing plants.
Negotiators are seeking to ensure that China can also benefit from it, but it is unclear whether the world’s second-largest economy will agree to a wider deal in exchange. “No one really knows what China’s position is,” the European official said. “They are fighting for time and keeping all options open.”
Developing countries are dissatisfied that this transaction will not allow them to levy more taxes on the largest multinational companies, and they will have the right to tax a small portion of the company’s profits based on sales.
The G24 developing country group requires the agreement to cover a larger share of profits and threatens to continue to impose its own digital tax.
They got a compromise that the threshold for companies covered by the global arrangement would be reduced from a turnover of US$20 billion to US$10 billion in seven years. A person representing developed economies said that if they reject this, “they will lose their chance.”
Developing countries also hope to increase the proposed global minimum tax rate of “at least 15%”.
In an online meeting on Monday, Nigeria’s ambassador to the OECD, Matthew Gebangjubora, stated that setting the global minimum level at that level “will not benefit African countries much” and “may continue to promote [tax] Erosion of the tax base from African countries”.
But when asked whether it is possible for developing countries to reject the deal, Gbonjubola said that “political pressure” made this a difficult decision. “Each jurisdiction needs to clearly state whether it supports or opposes it. There is no third option,” he said.