Guzmán celebrated G7 agreement on minimum tax on multinational profits, but 15% seems “very little”

Shortly after attending and supporting the measure the sanction in the Senate of the law which increased the tax rates on corporate profits, the Minister of the Economy, Martin guzman, today celebrated the agreement reached in London between G7 ministers to set a minimum global tax of 15% on the profits of multinational companies.

“A positive step to tackle the tax evasion of multinationals which weakens nation-states and threatens the development of peoples. We celebrate the engagement of the G-7, ”said the official, who accompanied his post with a link to a note on the subject from state agency Telam. “But beware: the minimum rate will probably also be the maximum rate. And 15% is very little, ”Guzmán warned, suggesting that the measure has little taste.

The G7 includes the United States, Canada, Japan, France, Germany, Italy and the United Kingdom, including governments, represented for the occasion by their finance ministers at a meeting attended by also the director of the Monetary Fund, Kristalina Georgieva. There, officials agreed on a minimum tax standard, a rate equal to or greater than 15% on companies around the world, which will particularly affect multinationals, established in many countries around the world, and limit their margin of convenience on where to settle. with the aim of reducing the tax burden.

The host of the meeting, Rishi Sunak, Britain’s Finance Minister said the measure’s aim is to “level the playing field” for the functioning of global businesses. “After years of debate, G7 finance ministers have reached a historic agreement to reform the global tax system to adapt it to the global digital age,” he told the BBC.

The initiative was one of the first under the administration of US President Joseph Biden, and it was promoted in international forums by Treasury Secretary Janet Yellen. The United States is the main beneficiary of this measure, which aims to prevent North American multinationals from locating most of their productive activities in other countries and from maximizing investments in the United States.

The argument with which he obtained the support of the G7, all the countries which have to gain by the measure, since they are the headquarters of large companies with a good part of their investments abroad, is to avoid a sort of “downward tax race”. , where some countries, especially in the developing world, manage to attract multinational investments by offering particularly low rates and particularly advantageous tax conditions.

It is no coincidence that Ireland, which over the past 20 years has developed software and other high-tech sectors offering very benevolent tax treatment to businesses, has been one of the critics of the initiative.

It is not causal, for example, that Ireland, which over the past two decades has developed software and other high-tech sectors by offering very benevolent tax treatment to business, has been one of the countries who expressly criticized the North American initiative, now formally supported by the G7.

It’s about “adapting to the global digital age and most importantly making sure the right companies pay the right taxes in the right places,” Sunak said. And he added: “This is a huge price for UK taxpayers.”

Talks

The G7 is not an international body and has no legislative power over other countries, but the agreement between such a powerful group of economies is an impetus to achieve its goal of a minimum rate of 15% to negotiate within the G20 and the Organization for Economic Co-operation and Development (OECD). Argentina has been a member of the G20 since 1999 and while the Macri government began negotiations – that the government of Alberto Fernandez ceased to join the OECD.

Biden’s goal is to prevent an investment drain and show the G7’s card in its internal negotiations with the Republican opposition in Congress, to gain support for his infrastructure investment initiative. The head of the White House will participate from Friday to Sunday in the summit of the leaders of the G7.

Yellen, the Secretary of the Treasury, called today’s announcement a “significant and unprecedented commitment” to meet the minimum rate of 15%, which will increase US tax revenues.

Bruno the Mayor, the French minister, said that with the agreement, the G7 “took up the challenge at this historic moment and announced that the agreement will come to fruition at the next summit of G20 leaders in Venice, Italy, on the month next.

What companies are they targeting

The measure targets large multinationals such as Google, Amazon and Facebook. “We want the international tax reform process to be successful and we recognize that this can mean Facebook is paying more taxes, in different places,” he said. Nick clegg, vice president of global affairs for Facebook.

However, questions remain unanswered, such as defining objectively and precisely what type of business will be reached.

If implemented globally, the deal will mean that in one case a North American company operating in Ireland will no longer be able to record a substantial portion of its profits in that district, with low taxation, to reduce what she pays in the United States, because there would be a minimum rate of 15% everywhere.

Very little

For Guzmán, however, the minimum rate of 15% seems very low. In fact, On Wednesday, the minister witnessed from the Senate lodges the enactment of a law whereby the lowest corporate income tax rate is 25%. Or for SMEs a rate 10 percentage points higher than the one that the G7 wants to set as the minimum rate for large multinationals. The law passed in the Senate instituted a second notch of 30% for net profits over $ 5 million and up to $ 50 million, and 35% for net profits over $ 50 million. In addition, the dividends distributed will in any case pay the special rate of 7%, through the applicable tax, which brings the maximum rate to 42%.

We then understand why for Guzmán 15% “is very little”.

KEEP READING: