NEW MINIMUM PROFIT TAX IN THE G7

#24New minimum profit tax in the G7

The G7 countries (USA, Canada, Japan, the United Kingdom, Germany, Italy and France) have agreed on the minimum rate of income tax applicable to the taxation of global companies. During the summer months, this agreement will be transferred from the G7 to the G20 and the OECD, where it will then be approved with high probability.

The G7 countries agreed on Saturday to promote a 15% minimum global income tax for large multinational companies as a tool to limit tax optimization through so-called tax havens. The tax should apply especially to companies such as Google, Facebook or Amazon.

It is seen as the first step that will be followed by many others. The reason is a long-term decline in the average global tax rate, which has lasted for more than 40 years, to set a fixed bottom.

Companies will be required to tax in the countries where they actually generate their profits. It will therefore not be possible to invoice services provided throughout Europe through a single company based, for example, in Ireland. A number of companies (including the above) will therefore have to pay taxes in the countries where they operate, even if they do not have a subsidiary there.

There were reports in the week that President Biden could back down (as a concession to Republicans in support of his infrastructure stimulus) from the planned increase in the US corporate tax rate from 21% to 28% if it passed the 15% minimum tax. If a new minimum tax is introduced, the United States should benefit most from it.

Such a process is welcomed by most European countries.