Last Thursday, 130 countries and jurisdictions Have joined The global agreement – considered by many to be historically significant – requires large multinational corporations to be taxed at a minimum of 15 percent. The agreement is the result of several years of negotiations coordinated by the Organization for Economic Co-operation and Development (OECD), but has been contested by some non-participating countries. Opposition from three countries that are part of the European Union: Ireland, Hungary and Estonia were particularly discussed.
The position of these states, which have the right to veto the agreement by the EU, risks extending the time to finalize the details of the text (participants set themselves to complete by next October), to implement it by the laws expected by 2023.
– read more: Global agreement for tax multinationals
The deal only affects companies with at least $ 20 billion a year in global revenue and a profit margin of at least 10 percent. One hundred large multinationals, Step The Wall Street Journal), e Can create According to the OECD, $ 150 billion in annual tax revenue worldwide neutralizes competition from tax havens and the negative effects of tax avoidance on the budgets of countries affected by this phenomenon.
The text is still a draft, but it foretells two fixed points called “pillars”.
First, they ensure that these companies’ tax revenues are evenly distributed among countries, and that they operate and make profits by redistributing certain tax rights (often at very low rates) from states where multinational corporations are based. , Regardless of whether they have physical presence in these countries. It could redistribute about $ 100 billion a year in taxes, according to OECD estimates.
The second – one being discussed – introduces a global minimum rate of 15 per cent in corporate profits, which is currently higher than what companies pay in Ireland (12.5 per cent) and Hungary (9 per cent). In Italy, for a comparison, corporate income tax is divided between IRES (state tax) and IRAP (regional tax), which leads companies to pay an average of 27.9 percent of profits in taxes as a whole.
The draft agreed to countries that together account for about 90 percent of the world’s GDP, including the United States, China and Russia. However, as we have said, the governments of Ireland, Hungary and Estonia have refused to join.
There are at least two obvious reasons for not wanting to join the agreement: Ireland offers a 12.5 per cent profit tax, in addition to affecting companies making a profit from patents and software at a tax rate of 6.25 per cent. This rate applies to most multinational companies under contract: Internet companies providing digital services across Europe through software such as Google and Facebook.
Until 2015, the country was able to attract even bigger US multinationals, thanks to an even lower tax regime, which allowed them to implement a strategy. “Double Irish”, Or“ Double Irish ”, because it involves the creation of two companies under Irish law. This is often combined with another strategy, which is “Dutch sandwich”,“ Dutch Sandwich ”. The resulting tax avoidance strategy, Very complicated, By exploiting the tax rules of the countries concerned and the tax treaties between them, allowed the multinational company to pay the lowest taxes on profits available outside the United States.
Since 2015, Ireland has changed its tax laws to put an end to this practice, but in return it has offered multinational corporations a reduced rate of 6.5% to prevent them from leaving the country. Therefore, the OECD agreement will affect this tax advantage in Ireland more than other European countries.
Nevertheless, Irish Finance Minister Basel Donohue was open to discussing the agreement: “I am not in a position to reach a consensus on the agreement, especially today, at a minimum global tax rate of at least 15%,” he added: “I have disclosed Ireland’s reservation, but I I am committed to the process and aim to find a solution that Ireland can still support. “
According to an analyst who asked Euronews, Jacob Kirkcourt, L’Arlanda To Somehow this agreement has to be compromised because it needs the support of the European Union and the United States in its Brexit talks with the UK.
The situation is different in Hungary, where the Fiscal Policy, introduced by Prime Minister Victor Orban, has helped to grow the economy while maintaining a high level of consensus among its citizens. Regression Country in terms of civil rights. According to Kirkcourt, precisely because of this setback, companies have no other incentive to relocate to Hungary other than taxation, as the application of the laws is uncertain. The country may therefore oppose further acceptance of the agreement by the European Union.
This is a problem for European countries that badly need contracts to acquire resources from multinational corporations that avoid tax authorities, such as Italy, France and Germany. In fact, under EU agreements, changes in tax policy must be unanimously approved, so that Hungary’s opposition (such as Ireland and Estonia) would be sufficient to prevent the whole camp from accepting the agreement. So the EU should negotiate with Urban As it happened NextGeneration EU, for approval of a plan of recovery from the epidemic, was opposed by Poland. This could extend the deadline and weaken the union’s negotiating position at the next meeting of G20 finance ministers in Venice on Friday, July 20.
– read more: Half defeat of Hungary and Poland
Then there is the case of Estonia. In this Baltic country, where corporate tax rates range from 14 to 20 percent, only distributed profits are taxed. In other words, if a company decides to reinvest its profits, they are not taxed. Therefore, the time at which the tax is fixed varies from the time the profit is generated to the time it is distributed. This causes tax payments to be postponed for years, creating the problem of why and how Observed From the Estonian Ministry of Finance, “Current version [dell’accordo] If Estonia does not tax the profits of the local branch within three or four years, it allows the state where the company is located to tax profits earned in Estonia. ” In short, there are risks that Estonia will see other countries reap untaxed profits over the next generation. Heard Bloomberg, Estonian Ministry of Finance he said The plan is still unclear to predict the country’s final position in this regard.
In addition to Ireland, Estonia and Hungary, Peru also (which it does not now do so due to lack of government), Sri Lanka, Nigeria and Kenya, as well as Barbados, Saint Vincent and the famous tax havens Grenadines.
However, the taxation mechanism assumed by the agreement would allow redistribution to take place even without adhering to tax havens: According to the draft, if a company opens a branch in a tax haven with a rate of less than 15 per cent, the country of origin of the company may impose a rate equal to the 15 per cent difference imposed on the tax haven. In other words: companies will no longer have the incentive to open offices in subsidized taxation countries because they still pay the same amount. This algorithm will neutralize competition from tax havens.
However, there may be other obstacles to the implementation of the plan. Very firm: US President Joe Biden is backed by a narrow majority in Congress, which could be reduced with next year’s by-elections: congressional approval is needed to implement the agreement.