G7 (United Kingdom, France, Germany, Italy, United States, Canada, Japan) finances opened in London on Friday, June 4, and the US Minimum Tax Project on the Agenda was revived by the administration of US President Joe Biden. The Americans set a minimum corporate tax rate of 21% before making up their minds to get 15% more votes. While the G7’s strong support for this project, which Paris has been wanting for years, other countries are less enthusiastic. Review.
Ireland agrees if we accept the tax rate as a floor rate
The tax reform that Joe Biden wants will have a big impact, especially in Ireland, where corporate tax rates are low. The idea of a world tax of 15% threatens the attractiveness of the country. It should be noted that after tax optimization, most Dublin-based digital giants actually pay less than 10%, or even 0% in some, while Ireland welcomes its business as 12.5%. Cases. According to the British daily PatronLast year, the Irish tax system did not tax US Microsoft on profits of 26 260 billion from one of its branches or three-quarters of Irish GDP.
So this shortfall is huge in the state treasury, yet the Irish government stands against this global tax plan, because this minimum tax will scare businesses and cause a loss of $ 2 billion. Euro in tax revenue per year. So on the question of supporting this initiative, Finance Minister Pascal Donohue interviewed the British Channel School News. “We are worried about a level of taxation that only the largest countries and the largest economies can benefit from. I am proud that our rates have enabled a country the size of ours to grow. Economy!”. Pascal Donohue suggests adopting Irish level taxation as the floor rate for this world tax. His position is essential in Europe: the Irish finance minister will preside over the Eurogroup until the end of 2022.
Belgium, Netherlands and Luxembourg to restore their image if necessary
Benelux countries are semi-tax havens for companies in all three categories; Belgium complies with tax regulations, these pre-arrangements with businesses for the purpose of imposing advance tax and attracting businesses; But above all, the Netherlands and Luxembourg became champions of this training. For these countries, a plan for a minimum level of corporate taxes would weaken long-established and highly profitable tax systems.
The discovery of various financial scams involving the taxation of multinational corporations is now forcing these countries to adopt the principle of a minimal global tax system to improve their image. If we trust the Batavian authorities, their goal is that the Netherlands’ name will no longer appear on the list of tax havens. “We can’t stop a transaction. “ Hans Wijbrief, now finance minister, says the tax has been imposed globally. The Netherlands has made a name for itself in the news with the revelations of the Paradise Papers: If Nike had succeeded in hiding billions of euros from Bermuda from US tax authorities through Bermuda, it would have been thanks to Dutch people returning European revenues to the Netherlands from many European tax administrations. On behalf of the competing authorities, the European Commission has already ruled that the tax judgment granted to the Netherlands Starbucks is illegal. The European Union (EU), the crown jewel of the Netherlands, added two years ago to its list of tax havens, becoming the first tax base to be indirectly linked to the EU. The protest of the Dutch citizens demanding more tax justice changed the attitude of the Batavian authorities.
For Luxembourg, the concern is no longer about crosshairs. Luxembourg has been a world financial center since 1960, and today the Grand Duchy receives four trillion FDI, or six million euros per Luxembourg citizen. Lux Leaks is there to prevent some multinationals from being separated from the tax level below 1 percent if the official corporate tax rate rises, Luxembourg has revised its tax policy. 24%. The Openlux revelations in February show that there are still gray areas in the Grand Duchy’s tax system and that the Luxembourg government is now ready to accept a deal if it establishes common rules of will.
Switzerland is not worried if the rate remains at 15%
There is one country in Europe that follows the debate on a minimum corporate tax: Switzerland. The birthplace of banking secrecy is the tax base of multinational corporations. It is a fact that Switzerland has some of the lowest corporate tax rates in the world. Here, the rates are as high as the cantons in the country.
In detail, companies pay a fixed federal tax of 8.5%. But each local government – with 26 in Switzerland – decides how much it wants to implement. For example, Niddwaldon’s canton adds 5.1% tax. This makes it one of the most attractive areas in the world for companies financially at the same level as Hong Kong. The overall corporate tax rate in Switzerland ranges from 11% to 21%. From this point of view Switzerland can be compared to Ireland in Europe.
Joe Biden recently called Switzerland a “tax haven” and said his idea of creating minimal global corporate tax risks would be detrimental to the country and reduce it strategically. The country has always attracted big companies. With several tax benefits. That has already changed in recent years under pressure from the European Union, Switzerland’s largest trading partner. For example, before 2020, you should know that multinational companies paid lower taxes than SMEs in Switzerland. This is no longer the case. The minimum tax rate we are talking about is 15%. Or the average observed in Switzerland. So this move should not lead to the exodus of big companies. As Joe Biden initially pointed out, it would be different if the tax was more than 20 percent.