© Reuters. FILE PHOTO: Britain’s Chancellor of the Exchequer Rishi Sunak speaks during an interview with Reuters at his number 11 Downing Street office, in London, Britain, June 2, 2021. REUTERS/Dylan Martinez
By David Milliken
LONDON (Reuters) – Finance ministers from the G7 group of rich nations will meet in London on Friday for two days of talks aimed at moving closer to a global deal to raise more tax from the likes of Google (NASDAQ:), Facebook (NASDAQ:) and Amazon (NASDAQ:).
The gathering, chaired by British finance minister Rishi Sunak, will be the first time all seven ministers will meet face-to-face since the start of the coronavirus pandemic.
U.S. President Joe Biden’s willingness to raise taxes on large businesses also creates more chance of an international consensus than under his predecessor Donald Trump.
“I’m hugely optimistic that we will deliver some concrete outcomes this weekend,” Sunak said in a statement released late on Thursday.
Sunak stressed the importance of his fellow ministers from the United States, Japan, Germany, France, Italy and Canada being able to meet face-to-face in Lancaster House, an ornate 19th-century mansion almost next door to Buckingham Palace.
“You need to be round a table, openly, candidly talking through things,” Sunak told Reuters in an interview this week..
Due to COVID restrictions, ministerial delegations have been cut down and there are few travelling journalists. Seating plans have been redesigned with the help of public health officials.
But the bigger challenge remains reaching an agreement on tax reform which could then be presented to a broader group of countries, the G20, at a summit in Venice in July.
French finance minister Bruno Le Maire said ahead of the meeting that an agreement would be a “decisive step” which he thought was “within reach”.
However, Japanese finance minister Taro Aso said on Monday that he did not expect agreement this week on a specific minimum tax rate.
The U.S. Treasury expects a fuller agreement to come when Biden and other heads of government meet at a secluded beach resort in southwest England on June 11-13.
MINIMUM 15% RATE
The United States has proposed a minimum global corporate tax rate of at least 15%. If a company paid tax somewhere with a lower rate, it would probably have to pay top-up taxes.
But just as important for Britain and many other countries is that companies pay more tax where they make their sales — not just where they book profits, or locate their headquarters.
The United States wants an end to the digital services taxes which Britain, France and Italy have levied, and which it views as unfairly targeting U.S. tech giants for tax practices that European companies also use.
British, Italian and Spanish fashion and luxury goods exports to the United States will be among those facing new 25% tariffs later this year if there is no compromise.
The United States has proposed levying the new global minimum tax only on the world’s 100 largest and most profitable companies.
Britain, Germany and France are open to this approach but want to ensure companies such as Amazon – which has lower profit margins than other tech firms – do not escape the net.
“All of them, and without exception” must be covered by the new rules, German finance minister Olaf Scholz told Reuters.
Daniel Bunn, an expert on global taxation at Washington’s Tax Foundation think tank, said this was likely to lead to more complex regulation.
“A lot of those rules are going to be, I think, politically based rather than principles-based,” he said.
Some large companies might even be incentivised to acquire less profitable subsidiaries to reduce their overall profit margin and dodge the new tax, he added.
Climate change is the other main point on the agenda. Britain hosts the United Nations’ COP climate summit in Glasgow in November, and wants countries to make businesses report their environmental impact in a consistent way, to make it easier for investors to back green projects.
British businesses will have to follow an environmental reporting model set out by the Financial Stability Board, a global regulator, from 2022. French businesses have followed similar national guidelines since 2016.