Venice (Italy), Jul 10 (EFE) .- The finance ministers and central bank governors of the G20 approved today the mechanism on taxation for multinationals agreed on July 1 within the framework of the OECD, and now they will focus on convince countries that are still reluctant to join.
“This is the result of a common effort. I hope that the countries that have not joined will change their decision,” said Italian Finance Minister Daniele Franco.
In the European Union (EU), Ireland, Hungary and Estonia, which have attracted private investment for years due to their low tax rates, have shown their doubts to adhere to this mechanism, but the Italian minister hoped that they will “change their mind” because, he said, the G20 countries represent around 90% of the world’s gross domestic product (GDP) and this “is putting pressure on the rest.”
Also the Secretary of the Treasury of the United States, Janet Yellen, said today in a meeting with the press that the G20 countries will try to understand until October the reluctance of states such as Ireland, Estonia or Hungary to join the global agreement to tax multinationals, but clarified that it is not essential for everyone to join.
“We are trying to understand the reservations of the countries that have not adhered” to the text for this international tax reform agreed on July 1 by 130 countries and jurisdictions of the 139 that are part of the so-called inclusive framework of the Organization for Cooperation and Development Economic (OECD).
However, he emphasized, “it is not essential that all countries are within.”
The agreement reached at the G20 is “historic”, as the ministers and bankers have remarked in the final declaration, because it will try to prevent multinationals from staying in tax havens and avoiding paying taxes.
The tax system is based on two pillars, the first concerns all companies with a worldwide turnover of more than 20,000 million euros and with a profitability (ratio between profits and income) of more than 10%.
Countries in which these groups earn more than one million euros (or 250,000, in the case of small states) will be entitled to receive a part of the tax they will have to pay.
What will be distributed between them is between 20% and 30% of the residual profit, once the country where the company is headquartered has kept the tax corresponding to 10% of the profitability.
French Finance Minister Bruno Le Maire said in statements to the media that France has asked for it to be 25%.
A MINIMUM TAX ON CORPORATIONS HIGHER THAN 15%
The second pillar is to apply a minimum corporate tax rate of at least 15% to companies with a turnover of at least 750 million euros.
The figure will continue to be debated, after countries such as France, Germany, Argentina or the United States have asked for it to be more ambitious, above 15%.
“I firmly believe that 15% is not enough. We have to do more,” Le Maire said.
German Finance Minister Olaf Scholz, for his part, also described the agreement in the framework of the G20 in statements to the media as a “great historic moment” and said that when consensus was reached “it broke into applause” in the room, because “everyone understood that something big was happening.”
He indicated that this global system will end the “downward competition” of countries to attract private investment and that it will improve the situation of public finances, something especially evident with the current coronavirus crisis.
The German minister also highlighted the understanding within the G20 to avoid “unfair practices” in the field of competition that contribute to global warming, for companies in a territory with more lax environmental legislation do not have a competitive advantage over other established in stricter regions.
(c) EFE Agency