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UPDATE 1-G7 nations near historic deal on taxing multinationals

Sat, 5th Jun 2021 12:02

* Disagreements remain over minimum rate, scope of tax

* U.S. proposes minimum global corporate tax of 15%

* European countries want all U.S. tech giants covered
(Adds detail)

By David Milliken

LONDON, June 5 (Reuters) - Group of Seven rich nations are
seeking to overcome long-standing differences on Saturday and
strike a landmark deal to close the net on large companies that
they say do not pay enough tax.

The proposed accord, which could form the basis of a global
pact next month, is aimed at ending a decades-long "race to the
bottom" in which countries have competed to attract corporate
giants with ultra-low tax rates and exemptions.

That has in turn cost their public coffers hundreds of
billions of dollars - a shortfall they now need to recoup all
the more urgently to pay for the huge cost of propping up
economies ravaged by the coronavirus crisis.

Britain's finance ministry said Saturday morning's talks
between the G7 finance ministers had been "productive".

Ministers are meeting face-to-face for the first time since
the start of the COVID-19 pandemic, and a formal statement after
the meeting concludes is due early afternoon.

"Talks are going well," a British source familiar with the
negotiations said.

The French and German finance ministers had already set up
high hopes for a deal after the first day of talks on Friday.

"We are just one millimetre away from a historic agreement,"
French Finance Minister Bruno Le Maire told the BBC.

British finance minister Rishi Sunak, who is chairing the
talks, also wants large companies to be required to declare
their environmental impact in a consistent way. The G7 is likely
to commit to avoid withdrawing COVID stimulus too early as well.

Rich nations have struggled for years to agree a way to
raise more revenue from large multinationals such as Google,
Amazon and Facebook, which often book profits in jurisdictions
where they pay little or no tax.

U.S. President Joe Biden's administration has given the
stalled talks fresh impetus by proposing a minimum global
corporation tax rate of 15%, above the level in countries such
as Ireland but below the lowest level in the G7.

"All countries face revenue loss when corporations don't pay
their share in taxes," said Eric LeCompte, executive director of
Jubilee USA, an alliance of organisations promoting debt relief.

"The G7 needs to support global tax reforms so we have
resources for people to get beyond this pandemic," he added.

Yet major disagreements remain on both the minimum rate at
which companies should be taxed, and on how the rules will be
drawn up to ensure that very large firms with lower profit
margins, such as Amazon, face higher taxes.

TO THE WIRE

One question is whether 15% should be the final rate or
whether it should be regarded as the floor for a final deal,
leaving room to agree a higher level at subsequent talks within
the broader G20 group of nations scheduled for Venice in July.

Beyond the level itself, just as important for Britain and
many others is that large multinationals pay more tax where they
make their sales - not just where they book profits, or locate
their headquarters.

"Their business model gives them chances to avoid taxes ...
much more than other companies," German Finance Minister Olaf
Scholz said.

The United States is also holding out for an immediate end
to the digital services taxes levied by Britain, France and
Italy, which it views as unfairly targeting U.S. tech giants for
tax practices that European companies also use.

"It's going to go right to the wire," one source close to
the talks said.

British, Italian and Spanish fashion, cosmetics and luxury
goods exports to the United States will be among those facing
new 25% tariffs later this year if there is no compromise.

The U.S. has proposed levying the new global minimum tax
only on the world's 100 largest and most profitable companies.

Britain, Germany and France are open to this but want to
ensure companies such as Amazon - which has lower profit margins
than other tech firms - do not escape the net.

(Writing by Mark John; Editing by Alexander Smith)

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