The G7 countries (France, Germany, the United Kingdom, the United States, Canada, Japan and Italy) confirmed that they want to impose a global tax rate of at least 15% on companies, and a more equitable distribution of the profit rights of multinational companies located in different countries.
Meanwhile, President Joe Biden, too, wants to raise the US corporate tax rate in general, targeting companies that make big profits but pay very little tax.
Tech giants are facing growing criticism in Europe and the United States, over fears that they have leverage that could give them a monopoly.
“The pressure has been building for years,” said Lillian Faulhaber, a law professor at Georgetown University. “But with the pandemic and its economic consequences, countries are finding it more difficult than before to balance their budgets, while voters are increasingly disenchanted with these companies that are making huge profits and seem not to pay big taxes,” she added, adding to the mounting anger over the accumulating power of platforms. digital. Actions are increasing in Europe and the United States against giant technology companies accused of anti-competitive practices.
19th century taxes
The rules currently under negotiation are supposed to address the issue of combating tax avoidance, which these companies ideally practice.
In the United States, these companies take advantage of tax-exempt opportunities through investments or hiring. Elsewhere, companies use legal strategies to shift profits to countries with low tax rates, and transfer losses to places where taxes are high.
“These companies are not ‘bad’ from an ethical or moral point of view,” Auerbach said. They take advantage of the advantages we offer them.” He added, “The international tax system was designed for an earlier stage, when companies had a clear headquarters and were produced in one place…Using a tax law that was applied in the nineteenth century in the twenty-first century economy may be a failure.” Part of the G7’s reform plan includes taxing multinational companies, where they earn their money instead of their offices and factories.
In Europe, this change in tax law will be felt in Ireland, which has adopted lighter tax policies to attract companies like Apple.
But it remains uncertain whether the G7 will achieve its goal. There are many questions to be answered, including whether countries can attract companies by continuing to give them rebates or tax breaks, what parts of profits should be taxed, and what will happen to digital taxes imposed in countries such as Britain, France and Italy and esp?
These questions must be discussed, and then it will be necessary for each country to decide how to equitably implement the potential agreement.
“In the end, it’s just a prick, nothing more,” said Dan Ives, an analyst at Wedbush Securities, adding, “Because the global tax structures of big tech companies are ultimately some of the most complex in the world.” For example, e-commerce Amazon relies on physical warehouses and currently has a profit margin of about 6%, instead of the 10% set by the G7 for new registration rules.
But the Seattle-based company must be subject to a tax on AWS (Amazon Web Services), a highly profitable cloud-computing subsidiary.