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LONDON – Finance Ministers of the G7 Rich Nations Group will meet in London on Friday for two-day talks aimed at moving closer to a global deal to collect more taxes from Google, Facebook and Amazon.
The meeting, chaired by UK Treasury Secretary Rishi Sunak, will be the first time since the coronavirus pandemic began that all seven ministers meet in person.
US President Joe Biden’s willingness to raise taxes for large companies also creates more opportunities for international consensus than under his predecessor Donald Trump.
“I am very optimistic that we will deliver some concrete results this weekend,” Sunak said in a statement released late Thursday.
Sunak emphasized the importance of having his ministerial colleagues from the United States, Japan, Germany, France, Italy and Canada meet in person at Lancaster House, an ornate 19th-century mansion almost next to Buckingham Palace.
“You have to sit at a table and talk openly and honestly about things,” Sunak said in an interview with Reuters this week. .
Due to COVID restrictions, ministerial delegations have been cut and there are few traveling journalists. The seating plans were redesigned with the help of health authorities.
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The bigger challenge, however, remains to reach an agreement on tax reform that could then be presented to a wider group of countries, the G20, at a Venice summit in July.
The French Finance Minister Bruno Le Maire said in the run-up to the meeting that an agreement was a “decisive step” that he believed was “within reach”.
However, Japanese Finance Minister Taro Aso said Monday he did not expect an agreement on a certain minimum tax rate this week.
The U.S. Treasury Department expects a broader deal when Biden and other heads of government meet June 11-13 at a remote beach resort in south-west England.
MINIMUM RATES 15%
The United States has proposed a minimum global corporate tax rate of at least 15%. If a company were to pay tax anywhere with a lower tax rate, it would likely have to pay surcharge.
But equally important for the UK and many other countries is that companies pay more tax where they do business – not just where they make profits or move their headquarters.
The United States wants an end to the taxes on digital services imposed by the UK, France and Italy, which it sees as unfair attacks on US tech giants for tax practices that are also followed by European companies.
British, Italian and Spanish fashion and luxury goods exports to the United States will face new tariffs of 25% later this year if there is no compromise.
The United States has proposed that the new global minimum tax should only be imposed on the world’s 100 largest and most profitable companies.
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The UK, Germany and France are open to this approach, but want to make sure that companies like Amazon – which has lower profit margins than other tech companies – don’t escape the net.
“All and without exception” must fall under the new rules, Federal Finance Minister Olaf Scholz told Reuters.
Daniel Bunn, an expert on global taxation at the Washington Tax Foundation think tank, said this will likely lead to more complex regulations.
“A lot of these rules, I think, will be political rather than principle-based,” he said.
Some large companies might even have an incentive to acquire less profitable subsidiaries in order to reduce their overall profit margins and evade the new tax, he added.
Climate change is the other important item on the agenda. The UK is hosting the United Nations COP climate summit in Glasgow in November and wants countries to get companies to report their environmental impacts consistently to make it easier for investors to support green projects.
UK companies will have to follow an environmental reporting model from the Financial Stability Board, a global regulator, from 2022. French companies have followed similar national guidelines since 2016. (Additional reporting by William Schomberg and Leigh Thomas; editing by Chizu Nomiyama)
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