The Organization for Economic Cooperation and Development said yesterday, “The global economy may lose more than 1 percent of production” one hundred billion dollars “if global talks collapse to rewrite cross-border tax rules, which could spark a trade war, after countries agreed to extend the talks to the middle 2021 “.
According to “Reuters”, about 140 countries agreed last Friday to extend the talks after the outbreak of the Corona virus pandemic and the reluctance of the United States before the US presidential elections, which undermined hopes for an agreement this year.
In an agreed statement, the countries stated that there is increasing popular pressure on large, profitable multinational companies to pay their share under global tax rules, after the Covid-19 pandemic pressed national budgets.
The goal is to update the rules in line with the era of digital commerce, in particular to discourage major internet companies such as Google, Facebook and Amazon from recording profits in low-tax countries such as Ireland, regardless of where their customers are.
And in the absence of new global rules, an ever-increasing number of governments are planning to impose their own digital taxes, raising threats of a trade backlash from US President Donald Trump’s administration.
“In the worst case, these disagreements will lead to a reduction in global GDP by more than 1 percent,” said the organization, which is leading the global tax talks, in estimating the implications of its failure.
On the contrary, the new regulations for digital tax and the proposed global minimum tax will raise income taxes for global companies around the world between 1.9 and 3.2 percent, or about 50 to 80 billion dollars annually.
The countries negotiating under the auspices of the Organization for Economic Cooperation and Development failed to reach an agreement to make the digital giants pay their “fair share of taxes”, under the threat that each country adopts its own system, according to the “French”.
“The cup is half full: the package is almost ready but the political agreement is missing,” said Pascal Saint-Ammann, fiscal policy official at the Organization for Economic Cooperation and Development.
He added, “The Covid virus caused a delay, but we are about to end, and there is a desire to end quickly,” explaining that the process that began in 2013 could reach a result by mid-2021.
In the absence of a formal agreement, the countries adopted a report setting out the general framework for this reform and based on the principle of defining new rules so that “large, profitable companies that practice international activity pay their fair share of taxes within the jurisdiction in which they are making profits,” according to the organization, and this also stipulates setting up A global minimum tax rate that can be set at 12.5 percent.
This roadmap will be presented tomorrow to the finance ministers of the G20 countries that authorized the Organization for Economic Cooperation and Development in 2018 to reform the international tax system by the end of 2020 after it became outdated following the emergence of companies known as Java, namely Google, Apple, Facebook, Amazon, and others. Main platforms.
In fact, these companies are being criticized for using legal systems that allow them to significantly reduce the tax burden by taking advantage of differences in tax rates between countries.
Aside from the health crisis, the US decision to suspend its participation in these discussions in June until the presidential elections on November 3 explains the delay in the discussions. “That would make an agreement in October unlikely,” Pascal Saint-Ammann said in June.
In addition, it is not certain that the United States will stand with other countries, as it is asking that the digital giants, which are American, be able to choose whether or not they will be subject to the global agreement, under the “safe haven” clause.
In the face of these many obstacles, Pascal Saint-Amman knows that success in his endeavor is still elusive, saying, “There is a lot of sensitivities, impatience and the temptation to take unilateral action in exchange for one that will take several years to implement after an agreement is reached.”
France opened the way by adopting in July 2019 a tax on digital giants that came into effect in early January 2019.
In response, the Trump administration threatened to impose a “100 percent” tax on the equivalent of $ 2.4 billion in French products.
For example, the corporate tax of 8.46 million euros that Facebook paid in France for 2019 is only a fraction of the 6.3 billion income taxes that Facebook announced in total in its 2019 annual accounts, taxes that were mainly paid in United State.
In January, Paris and Washington agreed to an armistice, and France pledged to postpone payment of the money owed for 2020 due in April and November, in order to give time for negotiations in the Organization for Economic Cooperation and Development.
But a source in the French Finance Ministry said last Friday that “in the event that an international agreement is not reached, the funds for the 2020 tax will be requested by the end of the year, while they must be paid in early 2021”, despite the risk of a new reaction from the United States.
Bruno Le Maire, the French Minister of Economy, believes that if the Organization for Economic Cooperation and Development fails, the matter will be entrusted to the European Union, because the digital giants are – according to him – “the only one that emerged victorious from the economic crisis.”
During their last summit in July, the heads of state and government of the European Union asked the European Commission to present in the first half of 2021 a proposal on “digital taxes”, a complex project in light of the financial strategies that differ greatly among member states regarding digital companies. .
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