Paris, France: France and Germany pushed for a “historic” agreement among major economies on a minimum tax rate for multinational firms on Wednesday, trying to bolster support after the plan was met with skepticism from European countries.
The idea for a 15% minimum tax rate, spearheaded by US President Joe Biden, has sparked controversy when Ireland’s finance minister raised “serious misgivings” about it.
“The change of (US) administration offers a historic opportunity… and we have to seize opportunities when they present themselves. It’s now. It’s now that we must act,” insisted French Finance Minister Bruno Le Maire at a joint press conference ahead of the upcoming Franco-German Economic and Financial Council.
Olaf Scholz, his German counterpart, expressed “optimism” about the prospects of reaching an agreement that would cease “disastrous fiscal competition” between countries.
“We are very close to concluding an international agreement” which will lead to “a revolution in international corporate taxation,” Scholz added.
In negotiations with the Organisation for Economic Cooperation and Development (OECD) and the Group of 20 (G20), Biden’s administration this week asked for an agreement on a unified tax rate of at least 15%.
However, Ireland’s Finance Minister, Paschal Donohoe, said on Tuesday that the country is “very concerned” about a worldwide rate that allows “just certain nations and economies of a certain size to benefit from that base.”
G7 is in the spotlight.
The argument has merit because Ireland is home to a large number of technology and pharmaceutical companies that were drawn to the country by its lower tax rate.
Dublin’s finance minister said this month that if a global minimum tax rate is imposed, it will lose two billion euros ($2.4 billion) in revenue each year starting in 2025.
On a visit to Dublin on Tuesday, Hungary’s foreign minister repeated Donohoe’s concerns.
“Like Ireland, Hungary is in favor of a low level of tax,” Peter Szijjarto said.
According to OECD estimations, Ireland’s corporate tax rate is 12.5 percent and Hungary’s is 9%, but France and Germany have rates of around 30 percent.
Luxembourg, which is home to a slew of international corporations, has stated that it supports “minimal taxation” in order to foster “fair competition” among nations but has not commented on the proposed 15% rate.
Finance ministers from the G7 group of advanced nations, which includes Germany, Canada, the United States, France, Italy, Japan, and the United Kingdom, will gather in London next week to discuss the US proposal.
Le Maire said he, Scholz, and British Chancellor of the Exchequer Rishi Sunak had promised to do “their utmost” at the conference to reach an accord.
They’ll build on that at the G20 summit in Venice in July, Le Maire said, adding that “step by bit, we’ll be able to persuade all of our partners.”
On Tuesday, the head of the International Monetary Fund (IMF) expressed her support for the plan.
A minimal tax, according to finance ministers, is vital to prevent countries from competing over who can offer multinationals the lowest rate.
They claim that the “race to the bottom” drains funds that could be used for other government priorities.