Int'l Tax News

Nana Ama Sarfo looks at how climate change and carbon taxation is becoming an emerging focus area for corporate shareholders.

France is pushing for a global agreement on minimum corporate tax thatwould include China and cover as many sectors as possible, French Finance Minister Bruno Le Maire said. After a Group of Seven meeting lastweek made progress on how to share out rights to tax multinationals, attention is now turning to the details of how to apply a floor of at least 15% for large companies. Rich nations are concerned that China may seek exemptions for certain sectors as the negotiations go into the next phase.

Mindy Herzfeld notes that tax planning occurs across party lines and points out tax gaming opportunities in recent Biden administration proposals and committed to as part of the G-7 agreed-on reform of international tax rules.

German conglomerate Siemens AG could be caught by rules designed to net Amazon.com inc. into the OECD's digital tax overhaul proposal, a company executive saidwednesday. The Organization for Economic Cooperation and Development isworkingwith nearly 140 countries to rewrite how multinationals, particularly large tech groups, are taxed so that a portion of their profits are reallocated to the marketswhere they make sales. Earlier this year the U.S. proposed that these changes should be limited to the 100 largest, most profitable companies.

The European Parliament's economic affairs and legal affairs committees on June 14 approved an informal deal on public country-by-country reporting by multinational companies thatwas struck June 1with representatives of the EU member states.

On June 5, 2021, the finance ministers of the G7 (Canada, France, Germany, Italy, Japan, the U.K., and the U.S.) announced their support for a global minimum tax of at least 15% and for the reallocation of 20% of the profits above a 10% profit margin for large multinationals. Jeff VanderWolk of Squire Patton Boggs considers the implications.

Governments are on the cusp of a multilateral agreement on a two-pillar international tax reform plan, part ofwhich is expected to cover Amazon, contrary to badly informed public debate, the OECD's tax chief said.

U.S. Treasury Secretary Janet Yellen told a congressional panelwednesday that digital services taxes stand in theway of international efforts to establish a global minimum tax, and she reiterated that the Biden administration could raise tariffs on countries that leave them in place.She also told the Senate Finance Committee that she expected all European Union countries, including Ireland, to sign onto a global minimum tax agreement.

The United Kingdom has not been lukewarm about a global minimum tax rate, but a 15 percent ratewould allow countries to "use corporation tax as a lever" to support their objectives, ministers said.

Unilateral digital services taxeswon't be removed immediately even if an agreement to remove them is reached at a July Group of 20 meeting, a senior Italian official said. There needs to be coordination between the time the global, so-called Pillar One solution is applied and the time the unilateral taxes are removed, Fabrizia Lapecorella, director general of finance in the Italian Ministry of Economy and Finance, said during a pre-taped interview for Bloomberg Tax's virtual Leadership Forum onwednesday. Coordinationwill be necessary at the the technical level, she added, noting that beyond the political attention therewould be legislative constraints ahead.

French Finance Minister Bruno Le Mairewill hold talkswith officials from Ireland, Poland, Russia, India and China as he seeks to overcome any potential opposition to an agreement on international taxation in time for a Group of 20 meeting in July. The gathering in Venice has gained more importance after the Group of Seven advanced economies overcame years of division this month to commit to an outline on changes to corporate tax rules and rates. But about 140 countries in total have to sign off on the details, and some have been uneasy over how changes could impact their economies and largest companies.

The European Commission plans to introduce a proposal for a directive thatwould mitigate tax-induced debt-equity bias by offering a tax allowance for companies that pursue equity financing.

Tech firms are urging Canada to abandon a proposed 3% digital services tax on tech companies until there is agreement at a global level to overhaul tax rules. Major industry associations filed submissions thisweekwith Canada's Department of Finance during a consultation for a tax thatwould target companieswith 750 million euros ($890 million) or more in global revenues and C$20 million ($16 million) or more in domestic revenues. The taxwould be in force Jan. 1, 2022. "We encourage Canada to reconsider discriminatory tax measures that depart from norms and target specific U.S. companies," Arthur D. Sidney, the Computer and Communications Industry Association's vice president of public policy, said in a filing Friday.

Negotiators are crafting a coordinated end to digital services taxes once pillar 1 of a global tax reform plan is implemented, but countries hoping to apply DSTs to out-of-scope companieswill be out of luck.

Talks in comingweeks between more than 100 governments before a Group of 20 meeting in Julywill build on the outlines of a deal earlier this month by Group of Seven finance ministers. Despite their breakthroughs on a minimum global corporate tax rate and a shift in philosophy allowing one country to apply levies to profits of another's national champions, multiple technical details remain unresolved.

French Finance Minister Bruno Le Maire said hewill have more conversationswith reluctant countries to ensure agreements on new global tax rules are reached at the upcoming G-20 meeting and among EU member states.

The Group of 7 finance chiefs sealedwhat they called a "historic global tax agreement" at a summit meeting in Britain thisweekend.

G7 Tax deal targets the most profitable global companies.

Big Techwill pay less tax in the UK under a deal agreed at the G7 than they currently pay under the country's digital service tax, according to calculations by a think-tank.

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.