In a major overhaul of the global tax system, US President Joe Biden wants the largest hundred companies in the world – those with revenues of at least $ 20 billion – to pay into the coffers of countries wherever they sell their goods or services sold, according to proposals submitted to more than 130 governments involved in ongoing tax talks.
Washington’s campaign aims to divert years of stalled negotiations aimed at finding ways for countries to raise taxes on Big Tech businesses, including Google and Facebook. U.S. officials have backed down against these plans and want land reform to include both digital and non-digital businesses after the U.S. government claimed the current plans were unfairly targeting their home businesses.
The US proposals – confirmed by three officials with direct knowledge of the matter – were sent on Wednesday to other countries involved in the ongoing tax talks under the auspices of the Organization for Economic Co-operation and Development, a group in Paris with mostly rich countries trying hammer. by the end of June a global agreement.
The officials spoke on condition of anonymity because they were not authorized to speak in public about the OECD negotiations. The Financial Times reported earlier on the U.S. tax proposals.
Washington’s pitch is bold, but is likely to lead to controversy. It is trying to rewrite the playbook on a potential global agreement on the taxation of the digital world after US officials called on all international companies – and not just Google and Facebook – to be subject to the new global treaty.
“The United States can accept no results that discriminate against U.S. businesses,” the Biden government outlined in its proposals, following a presentation of the proposal obtained by POLITICO.
According to the proposal, the Biden administration wants all international companies with an annual global revenue of about $ 20 billion to pay some form of corporate tax, wherever they sell their goods or services, officials said. That would limit the new levy to about the 100 largest companies in the world, including Google and Facebook, but also non-digital giants such as German carmaker Volkswagen.
According to the US proposal, the global profits of these companies are directed, which divides a yet to be determined amount of tax receipts between countries, depending on where businesses sell their goods. Washington also expects countries such as France and the United Kingdom to remove the existing tax on digital services focused only on U.S. businesses once a global agreement has been reached.
This approach replaces the OECD’s existing proposals to target multinational enterprises’ digital activities and consumer-oriented enterprises around the world. The complexity of digital activities with the fence, including online advertising, has drawn criticism from the corporate giants that would have to pay taxes.
It would also replace the existing global system of taxation on companies in the countries where they discuss their profits.
‘The US proposes to abandon the distinction between another [automated digital services] and [consumer-facing businesses] and to focus on the 100 largest [multinational enterprises], to make the system more manageable, ”said the director of direct commission, Benjamin Angel. tweeted Thursday. A careful examination of their proposal is now necessary. The coming months will be crucial. ”
Officials said the US approach is likely to bring in as much as the digital-focused proposals currently on the table from the OECD, estimated at about $ 100 billion.
“In short: a comprehensive scope is the simplest and most principled of controllable options,” reads the US presentation.
Bad to worse?
Not everyone welcomed Washington’s pitch.
According to Tove Maria Ryding, Policy and Advocate Manager of the European Network on Debt and Development, a civil society group, US proposals still do not solve the problem of having corporate tax rules that enable many businesses to to circumvent their obligations. for a more equitable global financial system.
“It’s really absurd to introduce a new global tax system that only applies to the 100 largest businesses,” Ryding said. ‘What we needed was a fundamental reform of the broken OECD price for transfer prices – not an extra system over the old system.
“The corporate tax system was very complicated and ineffective to begin with – there is now a real risk going from bad to worse,” she added.
The OECD is working on two initiatives, known as Pillar 1 and Pillar 2, as part of the many years of global negotiations. The first focuses on the taxation of multinational companies, depending on where they sell their goods and services. The second goal is to set a global minimum tax rate in an effort to curb tax havens.
Earlier this week, U.S. Treasury Secretary Janet Yellen threw her weight behind Pillar 2, which is similar to the U.S. minimum 10.5 percent tax on U.S. companies’ globally intangible low-tax income – known as GILTI.
Yellen further insists that other countries accept Biden’s proposal to double the GILTI tax to 21 percent as a global minimum tax. The US government hopes that doubling the threshold will help the White House pay for a $ 2 billion infrastructure plan at home, while preventing the US from being interrupted on the world stage.
Yet the pitch was received with skepticism about how to get the rest of the world to agree to a minimum tax of magnitude, especially as the Pillar 2 negotiations via the OECD focused on securing a minimum global corporate tax threshold of about 12.5 percent. This is the current tax rate in Ireland, a popular jurisdiction for multinational corporations due to Dublin’s low tax regime.