World minimum tax on companies: the objective is to “fight against tax competition between states”, according to an economist

World minimum tax on companies: the objective is to “fight against tax competition between states”, according to an economist

The minimum corporate tax plan across the planet would be “a real step forward” against tax havens and tax evasion, specialist Vincent Vicard told franceinfo.

The G7 opened on Friday June 4 in London.  (STEFAN ROUSSEAU / POOL / AFP)

“The idea is really that it is the countries of origin of multinationals that are empowered to tax their own multinationals”, explained Friday, June 4 on franceinfo Vincent Vicard, economist, head of the Analysis of international trade program at the Center for Prospective Studies and International Information (Cepii).

>> Minimum corporate tax: what do Ireland, Benelux and Switzerland think?

The G7 Finances opened in London on Friday with a proposed global minimum corporate tax on the agenda, an idea revived by the administration of US President Joe Biden, which receives common support from the major European powers.

franceinfo: What would be the principle of this global minimum tax?

Vincent Vicard : It would be to give the countries of origin of multinationals the possibility of taxing their multinationals from the moment when they are not sufficiently taxed abroad. Hence the importance of this minimum rate. Typically, for a French company which would have a subsidiary in a tax haven and which would pay 3 or 4% tax on its profits declared there, France would recover the right to tax the differential between this 3% and the rate which would be 15% or 21%, depending on what will be determined. The objective behind it is, on the one hand, to discourage multinationals from artificially locating their profits abroad, in countries where they pay very little tax. And also to discourage countries from lowering their tax rates too much. Because one of the objectives is also to fight against tax competition between states.

The countries would therefore be the ones who could charge this tax. Would this only concern their national companies or all the companies which are established on their soil?

The idea is really that the countries of origin of multinationals are empowered to tax their own multinationals. This is what is being discussed today. Moreover, the G7 countries which are discussing it today are the majority countries of origin of multinationals. But there are other systems that would be possible.

If we talk about the Gafam [Google, Apple, Facebook, Amazon et Microsoft], does that mean that it would be the United States which would recover the fruits of this tax?

Yes indeed. For the Gafams, this would be the case. We talk a lot about Gafam because indeed, they are companies that make a lot of profits. Their tax schemes, for example in Ireland, have received a lot of media coverage. But there are a lot of other companies. There are multinationals of European origin that also have tax avoidance practices. So for European countries, taxing their own multinationals which locate their profits in other European countries, other European tax havens, that would also represent fairly large sums.

Would this be a real step forward against tax havens and tax fraud?

Yes, that would be a real step forward. What you have to see is that we are in a situation where there are quite significant threats to the multinational tax system, threats that come from the tax avoidance of multinationals and threats that also come from tax competition between states. The fact that there is a race for the lowest tax bidder. And so it would be a real opportunity to give States the possibility to recover sovereignty over their taxation and to be able to levy taxes on their multinationals, which is more difficult today.