05/27/2021

G7 Nations Close on Global Digital Tax Deal

Last month, the Biden administration pitched a compromise to world leaders

European leaders expressed confidence this week that an agreement on new global tax rules is imminent, with G7 nations set to throw their weight behind a U.S. compromise on taxing large multinational corporations.

The Biden administration last month pitched a compromise to counterparts around the world that would apply new global tax rules to no more than 100 large multinational corporations. The U.S. plan would consider a company’s profitability in determining whether more of its income could be taxed by the countries where it does business.

The Organization for Economic Cooperation and Development (OECD) has been trying to reach agreement among nearly 140 countries on a global tax overhaul to address how “consumer-facing” digital giants like Apple, Google, Facebook and Twitter are taxed in countries where they have users. The OECD’s work has taken on some urgency as some countries have grown impatient and proposed their own digital tax plans while hoping for an international consensus.

With G7 finance ministers set to meet tomorrow and again next week, French Finance Minister Bruno Le Maire and German Finance Minister Olaf Scholz backed the U.S. proposal as an “interesting and solid basis” for discussion.

“This is a political battle that we have been fighting for with Germany since 2017,” Le Maire said yesterday at a press conference. “We have spared no efforts to push the discussions forward and find a compromise.”

The G7 countries are the U.S., U.K., Japan, Germany, France, Italy and Canada. A G7 agreement would have no formal authority but it would likely help the OECD gain support from other nations.

If an agreement is reached this year, the U.S. could need bipartisan support in the Senate to approve U.S. cooperation. Sen. Mike Crapo (R-ID), ranking member on the Senate Finance Committee, sent a letter to Treasury Secretary Janet Yellen this week seeking assurances that the Biden administration would not support any OECD plan that discriminates against U.S. companies.

“There continues to be strong bipartisan, bicameral agreement that the United States must not agree to an OECD approach that discriminates against American companies – a point that Treasury clearly acknowledges,” Crapo said. “This principle is a red line.”

This article was provided to OSAE by ASAE's Power of A and Inroads.