G7 ministers to discuss far-reaching deal on corporate tax

Donohoe to meet with US treasury secretary at bilateral meeting on Saturday

British chancellor Rishi Sunak (R) greets Kristalina Georgieva, managing director of the IMF, during the first day of the G7 summit in London. Photograph: Hollie Adams/EPA

British chancellor Rishi Sunak (R) greets Kristalina Georgieva, managing director of the IMF, during the first day of the G7 summit in London. Photograph: Hollie Adams/EPA

 

Finance ministers from the main industrialised countries are set to discuss a deal on the reform of the global corporate tax system , including a minimum tax rate for multinationals, at a G7 meeting in London this weekend.

The ministers look certain to signal support for a deal and reports on Thursday evening pointed to efforts to achieve a breakthrough on key details, including a global minimum corporate tax rate of 15 per cent, above the Republic’s 12.5 per cent rate.

The Minister for Finance Paschal Donohoe, will attend the meeting, which starts on Friday, in his role as president of the Eurogroup of finance ministers and will discuss corporate tax at a bilateral meeting on Saturday with US treasury secretary, Janet Yellen. The US is leading calls for an agreement at the Organisation for Economic Co-operation and Development (OECD) on a major overhaul of corporate tax rules, a process which threatens Irish tax revenue and also the use of a low tax regime to attract multinationals.

Sources in the UK government, which is hosting the meeting, were quoted by the Financial Times as being “cautiously optimistic” of a breakthrough at the G7 on outline terms for a deal on the two key issues in the OECD talks. This would involve an agreement on giving countries taxing rights on sales by major companies in their markets and an effective global minimum tax rate for multinationals of 15 per cent.

Earlier sources had said that it remains in the balance whether details of a proposed deal could be reached at this weekend’s meeting, with some ministers feeling it would be better to signal support for the process at this stage and reach a deal at the G20 meeting in July, where more countries will be represented.

Paschal Donohoe will also hold talks with the new head of the OECD, Mathias Cormann, another central player in the global tax talks. File photograph: Julien Behal Photography/PA Wire
Paschal Donohoe will also hold talks with the new head of the OECD, Mathias Cormann, another central player in the global tax talks. File photograph: Julien Behal Photography/PA Wire

‘Significant progress’

“I believe we can make significant progress in tackling some of the world’s most pressing economic challenges,” British finance minister Rishi Sunak, who is chairing the meeting, told reporters on Friday shortly before the meeting began. Mr Sunak stressed the importance of his fellow ministers from the United States, Japan, Germany, France, Italy and Canada being able to meet face-to-face in Lancaster House, an ornate 19th-century mansion almost next door to Buckingham Palace. “You need to be round a table, openly, candidly talking through things,” Sunak told Reuters in an interview this week. Due to Covid restrictions, ministerial delegations have been cut down and there are few travelling journalists. Seating plans have been redesigned with the help of public health officials, and Sunak greeted leaders by bumping elbows, not shaking hands.

Biden proposal

The US has recently signalled that it would agree to a 15 per cent global minimum rate, below the 21 per cent rate which the Biden administration has put forward for the international earnings of its companies as part of a US programme currently under negotiation with Congress.

Agreement on a recommended global minimum rate of 15 per cent among 139 countries at the OECD would leave the Republic with a choice of whether or not to increase the 12.5 per cent rate. While Mr Donohoe will attend the G7 meeting, he will not participate in the round-table tax discussions, as tax is not a competency of the Eurogroup but rather of the European Commission. Mr Donohoe will also hold talks with the new head of the OECD, Mathias Cormann, another central player in the global tax talks.

The ante has been upped ahead of the meeting by a decision by the US to apply tariffs on $2 billion of imports from Austria, India, Italy, Spain, Turkey and the UK in retaliation for these countries implementing their own digital services taxes on US multinationals. The US has deferred these tariffs for six months to allow time for an agreement at the OECD on an overall global approach to such taxes.

UK focus

Mr Sunak, has underlined the UK’s focus on the part of the global tax reform agenda relating to big multinationals paying tax in markets where they sell via the imposition of a digital sales tax. The US has put forward a revised plan for this part of the OECD talks , under which the 100 largest companies would be hit by this charge. This would reduce the amount of tax which some big players pay in Ireland with the Department of Finance pencilling in a possible revenue loss of up to €2 billion per annum, out of total corporate tax revenue of almost €12 billion. – Additional reporting Reuters