After much bargaining and concessions, the heads of state and government of the G20 on Saturday gave Rome the final green light to a historic tax reform which aims to put an end to tax havens, but which does not go far enough for the taste of some developing countries.
Under the aegis of the OECD, a total of 136 countries representing more than 90% of global GDP had pledged in early October to tax multinationals more equitably and to introduce a minimum global tax rate of 15% from from 2023.
This green light, announced by US Treasury Secretary Janet Yellen, will be formalized in the final G20 press release on Sunday.
“Today, all G20 heads of state approved a historic agreement on new international tax rules, including a global minimum tax,” said Ms. Yellen.
“For four years, I have been fighting to implement an international tax of at least 15% for multinational companies. Tonight, we are there! French President Emmanuel Macron tweeted.
“The minimum corporate tax is a great success, it is a clear signal of fairness,” added German Chancellor Angela Merkel.
A small revolution which may take time, however, insofar as each country must now translate this global agreement into its own legislation, a part that is not won in advance.
“The devil is in the details: all aspects of its implementation will have to be resolved and it must be approved by national parliaments,” Giuliano Noci, professor of strategy at the Polytechnic in Milan, told AFP.
150 billion dollars per year
The first part of this reform, which consists in taxing companies where they make their profits, regardless of their head office, is met with strong reluctance in the US Congress.
Because this measure mainly hits the American Internet giants, the famous GAFA (acronym for Google, Amazon, Facebook and Apple), inclined to practice tax optimization by establishing their headquarters where taxation is lowest, which they allows them to pay derisory taxes in relation to their income.
The minimum 15% tax is expected to bring in around $ 150 billion in additional revenue per year.
A hundred multinationals with more than 20 billion euros in annual turnover will see part of their taxes redistributed to the countries where they actually carry out their activities.
This perimeter as well as the minimum tax of 15% are considered insufficient by some emerging countries, especially as the average corporate tax rate in the world is now 22%, against 50% in 1985.
Argentina had thus pleaded for a rate of 21%, or even 25%, to combat “tax evasion by multinationals”.
If Argentina ended up joining the agreement, Kenya, Nigeria, Sri Lanka and Pakistan, associated with the negotiations which included 140 countries, are missing.
“The agreement was negotiated with the developing countries and reflects a good part of their demands, but it is true that it is a compromise”, declared to AFP Pascal Saint-Amans, director of the Center of policy and administration of the OECD and architect of the reform.
Rally of refractory countries
Its final version thus allows more small economies to benefit from part of the redistributed tax, by lowering to 250,000 euros per year the minimum required for the revenues of the companies which are realized there, against one million euros for richer countries.
The Independent Commission for the Reform of International Tax (ICRICT), a think tank including renowned economists such as Joseph Stiglitz and Thomas Piketty, believes, however, that this is a “bargain deal” which “The lion’s share goes to the rich countries”.
The negotiators of the agreement “made concessions to join three tax havens like Ireland, Estonia and Hungary, but did not listen to the developing countries”, told AFP its secretary general , Tommaso Faccio.
Ireland has thus waived its very low corporate tax of 12.5% against the assurance that the future minimum rate will remain stuck at 15%. Previously, there was talk of a rate of “at least 15%”.