Int'l Tax News

G20 members have the opportunity to improve upon the one-sided deal proposed by a group of rich countries, and set the basis for a better deal that can stick.

Glenn Hubbard discusses how to achieve a better global tax system outside of GILTI.

Swiss-based multinationals such as commodities trader Glencorewill receive subsidies and other incentives under plans Switzerland is drawing up to maintain its competitive tax rates, even as the country prepares to sign-up to the G7's new plan for a global minimum tax on big businesses.

Ireland's second biggest opposition party has backed a "small increase" in the country's corporate tax rate, in a sign that Dublin's longstanding political consensus on multinationals is cracking after the G7 agreed a plan for global taxation reform.

A surprise green book provision that disallows deductions for exempt or preferentially taxed income may not be gathering the most headlines, but it still is getting interest from practitionerswondering about its significance.

Senate Finance Committee Chair Ronwyden, D-Ore., expects heavy lifting domestically and internationally to implement a global minimum tax after an accordwas struck by the G-7 countries.

The 15 percent global minimum tax floor that G-7 finance ministers have agreed to is a good first step, but the G-20 must show leadership by pushing that rate higher, according to an internationalworkers' union.

OECD discussions on a minimum tax could influence the U.S. Treasury's 15 percent minimum tax on book earningswhen it comes time to flesh out the green book proposal.

Treasury's "comprehensive scoping" proposal for pillar 1 of a two-pillar OECD-led global tax reform projectwon't hurt the U.S. purse, Treasury Secretary Janet Yellen told the Senate's top Republican taxwriter.

France expects to raise billions of euros under a two-pillar global tax reform plan, but many issues ÔøΩ including the taxation of Amazon ÔøΩ must be resolved in negotiations first, French Finance Minister Bruno Le Maire said.

Representatives of the 27 EU member states have approved the deal on a public country-by-country reporting directive thatwas informally struckwith representatives of the European Parliament June 1.

Support for a proposed global tax overhaul plan got another political boost after the U.S. and U.K. leaders backed key elements of the project, including a global minimum tax rate of at least 15 percent.

The U.S. saidwednesday itwill impose tariffs on the U.K. and five other countries in response to their taxes on U.S. technology companies, butwill suspend the levies for six months as it seeks to negotiate an international resolution. U.S. trade representative Katherine Tai said investigations determined that tariffswere justified because of digital-services taxes imposed on U.S. companies by the U.K., Austria, India, Italy, Spain and Turkey. She said the tariffswould be suspendedwhile the U.S. focuses on finding "a multilateral solution to a range of key issues related to international taxation."

Over theweekend, finance ministers from the Group of Seven leading nations agreed on the outlines of a global tax deal, including a minimum tax of at least 15% and some reallocation of taxation rights. It raises the odds of a global accord later this summer that could cost multinational giants an additional $50 billion to $100 billion annually, according to the Organization for Economic Cooperation and Development. Plenty of obstacles remain on the path to an international agreement and the history of tax reform might tempt some to assume nothingwill change. Yet investors should prepare for higher tax billswhatever happens to the latest plan. If it fails to bite, digital service taxeswill instead.

An endeavor by Group of Seven nations to set minimum global tax rates for big companies presents a rare opportunity to satisfy objectives of both the U.S. and China. Still, Beijing's support for the proposal isn't a foregone conclusion. The proposals are expected to be on the agenda next month at a ministerial meeting of the Group of 20, a consensus-driven organizationwhich includes China. Under the proposals, nationswould agree to adjust their regulations to tax the biggest companies based onwhere they operate and set new thresholds, including a 15% minimum tax rate. The dealwould appear to have few direct implications for the tax system in China,which already imposes rates above thresholds proposed and has stepped up enforcement of tax rules at home. Changes in global tax policy could have a bigger effect in Hong Kong, a financial center that boasts low tax rates, aswell as the gambling enclave MacauÔøΩboth Chinese territories.

An agreement bywealthy countries to impose minimum taxes on multinational companies faces a rocky path to implementation,with many governments likely towait and seewhat others, especially a divided U.S. Congress,will do. Treasury Secretary Janet Yellen hailed the deal, reached by finance ministers of the Group of Seven leading nations over theweekend in London. She called it a return to multilateralism and a sign that countries can tighten the tax net on profitable firms to fund their governments.

There's a simple test forwhether international moves to crack down on tax avoidance announced over theweekend are going to be effective: Check the stock market. After all, at their core, the measures announced by the Group of Seven nations represent a plan to reduce the profits of major multinational companies. For a company like NVidia Corp.,which paid an effective tax rate of 2.63% over the most recent 12-month period, news that theworld's largest economies are planning to implement a tax floor of 15% ought to represent a substantial hit to future earnings. There's no sign that's happening yet. If anything, the renewed likelihood of a global tax agreement since the Organization for Economic Cooperation and Development came outwith detailed plans for such a deal last October and President Joe Bidenwas elected the following month has only increased the valuation premium for companies that, on paper,will lose out.

Rich nations are bracing for China to seek exemptions from a global minimum corporate tax, a potential stumbling block for governments racing to reachwider international consensus on the plan next month. Some officials see China as not easily signing on to the global minimum tax rate of at least 15% endorsed by Group of Seven finance ministers lastweek, people familiarwith the discussions said on condition of anonymity because of the sensitivity of the talks. China has a basic corporate tax rate of 25% for most companies, but reductions for high-tech sectors and for investment in research and development mean effective rates can fall below 15%. Beijingwillwant to retain tax incentives that it sees as key for its economic development, especially in advanced technologies.

Irelandwill make the case for the role of legitimate tax competition, Irish Finance Minister Paschal Donohoe said after the Group of Seven advanced economies agreed on a minimum global corporate tax rate of at least 15%. "Today is an important sign post," Donohoe said. "It does have consequences for the future of corporate tax policy across theworld, but in the process that is to come, I'll be making the case for the role of legitimate tax competition," he told reporters in London, adding that hewill be engaging "constructively"with the Organization for Economic Cooperation and Development and U.S. Treasury Secretary Janet Yellen. Any international agreement on how companies are taxedwill need to meet the needs of "small and large countries, developed and developing," Donohoe earlier said in a tweet, noting that there are 139 countries in the OECD.

Treasury Secretary Janet Yellen'sweekend dealwith G-7 counterparts on a framework for a global minimum corporate tax has made for a tougher sales job for President Joe Biden's proposed changes to U.S. tax law.

Multinational companies have long used creative but legalways to shrink their tax bills. One is to book profits from customers in places like Boston and Berlin as if they came from, say, Bermuda,which has no corporate income tax. Theworld's richest economies have agreed to jointly pursue a revamp of the global tax system thatwould undercut the effectiveness of such a strategy.

Switzerland said the countrywas committed to remaining an attractive business hub in light of a landmark deal by the Group of Seven rich nations that could help countries collect more taxes from big companies. "Switzerland has taken note of this expected declaration of intent by the G7," the State Secretariat for International Finance said in an email. "For Switzerland, the focus is on the overall package of competitive framework conditions for its own location. Eitherway, Switzerlandwill take the necessary measures to continue to be a highly attractive business location."

A tax deal between theworld's richest countries brings global governments a step closer to clawing back some power from technology giants that have used century-old regimes to build upwealth eclipsing the economies of most nations.while aweekend accord struck by Group of Seven finance ministers aims to close the net around all major multinationals, the tech industry is particularly adept at taking advantage of the current system. That's because its main assets -- software code, patents and other intellectual property -- are relatively easy to maneuver compared to physical assets.

Spain is pushing aheadwith its unilateral digital services tax, but it may shelve the measure if negotiations to reform international taxation are successful, a Finance Ministry spokesman said. The government sees theweekend G7 agreement as an important step, but itwon't change its digital tax plans at such an early stage of discussions, the spokesman said. "Nowwewill have to see how the plan develops in the G20 and the OECD," he added.

French Finance Minister Bruno Le Maire said Amazon.com and other tech giants must fallwithin scope of international tax plan. In an interview on RMC, Minister Le Maire also mentioned, "Amazon has to be in it,wewon't have a minimal tax on companies of at least 15% so that the biggest digital companies like Amazon are let off, Francewill fight so it's there." Part of Amazon's business like deliveries don't generate enough profit to qualify,while other operations like for the cloud are very profitable; "The solution is to divide this into segments and taxwhat is very profitable," he said.

The Group of 7 nations agreed to back a new global minimum tax rate that companieswould have to pay regardless ofwhere they are based.

The Biden administration is trying to persuade other nations to approve a global minimum tax as itworks to curb profit shifting and raise corporate taxes in the United States.

The tax deal agreed by theworld's leading advanced nations thisweekend is the first substantive proof of revived international co-operation since President Joe Biden brought the US back to the negotiating table. Yet there is still a long road ahead before it can be implemented.

G7 tax deal and EU breakthrough on disclosure highlights shift in the openness democratic societies expect.

The G7 advanced economies have struckwhat they have termed a "historic agreement" on taxing multinationals in a bid to create unstoppable momentum for a global deal.

EU negotiators have agreed rules to force large multinational companies to disclose publiclywhere they book profits and pay tax in the bloc as part of Europe's drive to clamp down on corporate tax avoidance.

The Biden Administration is seeking to fund its tax proposals through various means, including raising the corporate tax rate andchanging the base erosion and anti-abuse tax to the stopping harmful inversions and ending low-tax developments (SHIELD) regime.

Positive signals from OECD ministers about a package of proposals to modernize the international corporate tax system could lead to an accord among the countries negotiating the plan, the OECD's new secretary-general said.

Representatives of the European Parliament and EU member states on June 1 agreed on a draft directive requiring multinational companies to publicly disclose details about their economic activities in each country.

To best combat harmful tax practices, qualified majority voting (QMV) should be accompanied by enhanced state aid enforcement and the inclusion of a minimum effective tax rate in the EU Code of Conduct for Business Taxation.

The United Stateswill hold off on retaliatory trade actions against six trading partners over their digital services taxes to give more time for countries to conclude multilateral negotiations on a global tax reform agreement.

Senate Finance Committee Chair Ronwyden, D-Ore.,wants more information on the tax practices of AbbVie Inc. after accusing the pharmaceutical giant of sharply reducing its effective tax rate by shifting profits overseas since passage of the 2017 tax law.

Questions are arising overwhether one of the U.S. Treasury's green book proposals designed to strengthen anti-inversion rules may be interpreted so that it reaches beyond inversion transactions and applies much more broadly.

Treasury's spurning of the base erosion and anti-abuse tax in favor of the stopping harmful inversions and ending low-tax developments (SHIELD) proposalwas a result of the BEAT's failures of being both overinclusive and underinclusive.

After meetingwith Treasury Secretary Janet Yellen and Treasury staff, Senate Finance Committee Chair Ronwyden, D-Ore., and Houseways and Means Committee Chair Richard E. Neal, D-Mass., said in a joint statement they"are optimistic that a strong multilateral agreement can be reached to harmonize our international tax rules, end the race to the bottom, and put a stop to digital services taxes," they said.

Practitioners should not equate silence on some issues in Treasury's proposal modifying the global intangible low-taxed income provisionwith an unwillingness to revisit elements thatwould become more burdensome to taxpayers following a country-by-country shift.

The administration sees an agreement on a minimum tax as away to prevent companies from making decisions aboutwhere to locate based on corporate tax rates. Administration officials also see an agreement as away to prevent U.S. multinational corporations from becoming less competitive if the U.S. raises its corporate taxes. Treasury Secretary Janet Yellen said at a House hearing on Thursday that the U.S. is attempting to reach an agreement on a global minimum tax "thatwould stopwhat's been essentially a race to the bottom, so that it's competitive attractions of different countries that influence location decisions, and not tax competition."

Group of Seven (G-7) finance ministers thisweek are expected to pledge to be ambitious about the rate for a global minimum tax as international tax negotiators are seeking to reach a deal in July, Reuters reports. The Biden administration has floated a global minimum tax rate of at least 15 percent. The administration views a deal on a global minimum tax as away to help ensure that U.S. companies are internationally competitive if the U.S. raises its corporate tax rate, as Biden has proposed. The G-20 is hoping to reach a political agreement on a global minimum tax at its meeting next month.

President Joe Biden's proposed tax hikes are forecast to bring in $3.6 trillion over the next decade, the Treasury Department said Friday, a key funding source for the $4 trillion he hopes to spend remaking the American economy and social safety net. The figure, representing the sum of all tax increases if enacted by Congress, came as is part of the "Greenbook" report that accompanies thewhite House's $6 trillion 2022 budget request, also released on Friday. It effectively serves as the revenue side of the ledger, against Biden's spending priorities in the budget.

A Group of Seven meeting thisweek is unlikely to settle on a rate for a global minimum corporate tax, Japan's Finance Minister Taro Aso said, sounding a note of caution before he and his counterparts gather in London. Expectations of a preliminary deal between theworld's richest economies have risen after the Joe Biden administration made proposals on both a minimum rate and rules to reallocate tax revenues of the biggest multinational firms. France's Finance Minister Bruno Le Maire said lastweek that the June 4-5 meeting must give momentum to clinching a global accord in mid-July.

French Finance Minister says U.S. proposal for a global minimum tax on corporations of 15% is a "good compromise," but the key question is clearly to have a compromise and agreement about the two pillars: digital taxation and minimum taxation." Le Maire says there must be a political agreement on both elements of international tax negotiations by the G-20 meeting in July at the latest.

The Organization for Economic Cooperation and Development's two-part planwould see more corporate profits attributed to the countrieswhere companies make sales, known as "Pillar One," and establish a global minimum corporate tax rate, known as "Pillar Two." The U.S. in April pitched a proposal thatwould narrow the OECD plan and target 100 of the largest and most profitable companies. Crapo called for Treasury to report to Congress on how many U.S. companieswould be among the roughly 100 firms thatwould see their profits reallocated under the U.S. Pillar One proposal, and how the planwould affect U.S. tax revenue.

The EU's digital levywill be broadly based so as not to discriminate against U.S. tech firms, a top European Commission tax official said Tuesday. The governments of France, Spain, and Italy, among others, have unilaterally acted to create their own digital services taxes. That drew the ire of the Trump administration,which argued that they unfairly targeted U.S. tech firms because of their high thresholds for earnings. It opened trade investigations to determinewhether they justified the imposition of retaliatory tariffs. Angel said that the EU's taxwould show that concerns that the new digital levywould be similar to these taxes are misplaced.

Germany and France said discussions on a global agreement on corporate tax rateswere entering the home stretch and that a deal could be reachedwithinweeks. French Finance Minister Bruno Le Maire indicated support for a U.S. proposal to set the minimum rate at 15%, calling it an "interesting and solid basis" for discussion.

A global agreement that could reshape the tax landscape for the biggest corporations is approaching a crucial first stage as the Group of Seven nations hone in on an accord that might feature both a minimum rate and encompass digital giants. If finance ministers due to meet virtually on Friday and in person nextweek can find enough common ground, that could pave theway for awider consensus to formwithin the Group of 20, building a foundation for theworldwide agreement that is in negotiators' sights.