The G7 countries agree on a corporate tax “of at least 15%”, France welcomes a “historic” step.
“Tax dumping now ends with this agreement”, said on Saturday June 5 on franceinfo the Minister of the Economy Bruno Le Maire, after the agreement “historical” on a global minimum tax agreed between G7 finance ministers. After a two-day meeting in London, ministers announced a better distribution of tax revenues from multinationals, especially digital giants.
The worldwide corporate tax rate“At least 15%” on which the G7 is committed is “a starting point”, for Bruno Le Maire, who sees “the possibility” to arrive at a rate that “Is getting closer to our corporate tax rate” of 25%.
franceinfo: How is this agreement historic?
Bruno Le Maire: It is a historic agreement because it relates to what is most sensitive in the international financial field, that is to say taxation. We have agreed to tax the digital giants. And we agreed to fight against optimization and tax evasion with a minimum tax rate for all large multinationals. We’ve been fighting for four years, and we got there. It must be a source of national pride. When France in 2017, at the initiative of the President of the Republic, proposed to tax the digital giants, to set up minimum taxation, everyone told us, you will never succeed, it is too difficult, the financial stakes are too high.
What has changed the situation? The arrival of Joe Biden in the United States, the health crisis?
What changed the situation is indeed the American position. Donald Trump has consistently opposed this international tax agreement. Joe Biden, he paved the way for this agreement. And I think that shows how much, when Western states are united, they can make a difference. And then, you are right, there is the crisis. We have all spent a lot in the last few months to protect our businesses, to protect our employees. This agreement represents tens of billions of euros in tax revenue for the states concerned.
Concretely, how will this happen? What is the mechanism?
Let’s say you have a large multinational that is making profits in France. What is she doing today? It relocates its profits so as not to have to pay the corporate tax rate in France, which in 2022 will be 25% for all companies. They will relocate the profits to a country, sometimes even to a European country, where the real corporate tax rate is 2%. With this agreement, all this money that we are losing for the public treasury, to finance our schools, our nurseries, our hospitals, we will be able to recover the difference and we will have the right to recover the difference. So the multinational will always be able to relocate to a country where the rate is 2%. But the 13% difference from the minimum rate that we have set for the moment at 15%, we will recover them. And that is why the rate is an important issue. We said 15%, that’s a starting point. But the closer it gets to our own corporate tax rate of 25% in 2022, the better for us.
Do you hope to be able to increase this rate?
One thing after another. We remain hopeful. We were told “it’s impossible to reach an agreement on international taxation”, we got there. Again, this is a source of national pride. We are now told that 15% is already very high. In the G7 agreement – it was a hard negotiating point – we obtained at least 15%, and not just 15%.
For us, it would obviously be ideal to have a higher rate, because that means that we will recover more taxes and more money to finance our public services. The closer we get to our corporate tax rate, the better.
Does France also hope to recover multinationals, which are again more attractive, and also to recover seats installed in our country?
In any case, there will be much less interest for these large multinationals to relocate. As long as they know that, even if they put their headquarters or their profits in a tax haven, in any case, the States, whatever they are across the planet, will be able to recover up to at least 15% of corporate tax, I think that’s going to balance things out. This shows a very important point: fiscal dumping leads nowhere, especially in Europe. For years we have been explaining, to our Irish partners for example, that fiscal dumping is not the right solution. Here too, we are there. We can see that fiscal dumping now ends with this agreement.
The G7 was the first step. The next step, is it the G20?
It is an important and difficult step. There, Western states have shown that when brought together they can set rules for the 21st century. It really is a major change. People keep telling us, in the 21st century, Asia will set the rules. We have just shown that Western states can also set the rules. At the next stage in a month at the G20, the difficulty will be to convince our Chinese partner in particular. I have believed in it for four years. I went there with the faith of the coalman in this negotiation for four years. And you see it works sometimes, the faith of the coalman.