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G7: Rich nations back deal to tax multinationals
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- Lemon Half
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G7: Rich nations back deal to tax multinationals
From the BBC -
G7: Rich nations back deal to tax multinationals -
The G7 group of advance economies has reached a "historic" deal on taxing multi-national companies, the UK's Chancellor of the Exchequer, Rishi Sunak says.
Finance ministers meeting in London agreed to commit to the principle of a minimum corporate tax rate of 15%.
Tech giants such as Amazon and Google could be among the companies affected.
The move could see billions of dollars flow to governments to pay off debts incurred during the Covid crisis.
The deal - from the US, UK, France, Germany, Canada, Italy and Japan - will put pressure on other countries to follow suit, including at a meeting of the G20 next month.
Mr Sunak said the agreement was designed to create a level playing field for global companies.
"After years of discussion, G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age," he said.
https://www.bbc.co.uk/news/world-57368247
Cheers,
Itsallaguess
G7: Rich nations back deal to tax multinationals -
The G7 group of advance economies has reached a "historic" deal on taxing multi-national companies, the UK's Chancellor of the Exchequer, Rishi Sunak says.
Finance ministers meeting in London agreed to commit to the principle of a minimum corporate tax rate of 15%.
Tech giants such as Amazon and Google could be among the companies affected.
The move could see billions of dollars flow to governments to pay off debts incurred during the Covid crisis.
The deal - from the US, UK, France, Germany, Canada, Italy and Japan - will put pressure on other countries to follow suit, including at a meeting of the G20 next month.
Mr Sunak said the agreement was designed to create a level playing field for global companies.
"After years of discussion, G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age," he said.
https://www.bbc.co.uk/news/world-57368247
Cheers,
Itsallaguess
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Re: G7: Rich nations back deal to tax multinationals
About time. Those tax rules were an anachronism framed in the pre-internet context.
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Re: G7: Rich nations back deal to tax multinationals
Secondly, the rules will aim to make companies pay tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits.
Not sure I understand this.
We already have a sales tax in the UK called VAT.
Is this Corporation tax now going to levied as well in all countries?
As far as I can tell this is all meaningless other than allowing countries where profits are declared to charge 15% if they so wish and many of the smaller countries will not be members of G20 and thereby not forced to adopt G20 policy, so what changes?
Regards,
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Re: G7: Rich nations back deal to tax multinationals
I must admit I'm not totally clear how the current state of affairs works for multinationals.
Using Google as an example, is the current situation one whereby GOOG pay 21% CT for any profits in the US, but they pay 0% CT for profits made abroad (i.e. not in the US)?
So then for example, for their "foreign profits" while they hold the cash/assets in foreign banks, still no tax, but the money is taxed, if and when it is repatriated, i.e. transferred into a "local" i.e. a US bank?
Is this how it currently works?
thanks Matt
Using Google as an example, is the current situation one whereby GOOG pay 21% CT for any profits in the US, but they pay 0% CT for profits made abroad (i.e. not in the US)?
So then for example, for their "foreign profits" while they hold the cash/assets in foreign banks, still no tax, but the money is taxed, if and when it is repatriated, i.e. transferred into a "local" i.e. a US bank?
Is this how it currently works?
thanks Matt
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Re: G7: Rich nations back deal to tax multinationals
TheMotorcycleBoy wrote:I must admit I'm not totally clear how the current state of affairs works for multinationals.
Using Google as an example, is the current situation one whereby GOOG pay 21% CT for any profits in the US, but they pay 0% CT for profits made abroad (i.e. not in the US)?
So then for example, for their "foreign profits" while they hold the cash/assets in foreign banks, still no tax, but the money is taxed, if and when it is repatriated, i.e. transferred into a "local" i.e. a US bank?
Is this how it currently works?
thanks Matt
I believe this is how the US tax system now works for corporations with off shore profits:
https://www.taxpolicycenter.org/briefin ... es-it-work
Regards,
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Re: G7: Rich nations back deal to tax multinationals
odysseus2000 wrote:Secondly, the rules will aim to make companies pay tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits.
Not sure I understand this.
We already have a sales tax in the UK called VAT.
Is this Corporation tax now going to levied as well in all countries?
As far as I can tell this is all meaningless other than allowing countries where profits are declared to charge 15% if they so wish and many of the smaller countries will not be members of G20 and thereby not forced to adopt G20 policy, so what changes?
Regards,
Nor me.
Or is the next step to persuade the remaining 175 countries in the world to join the 15% CT scheme too?
(Although the sale tax called VAT is paid by the consumer on top of the purchase price, not the company on its profit margin.)
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Re: G7: Rich nations back deal to tax multinationals
odysseus2000 wrote:TheMotorcycleBoy wrote:So then for example, for their "foreign profits" while they hold the cash/assets in foreign banks, still no tax, but the money is taxed, if and when it is repatriated, i.e. transferred into a "local" i.e. a US bank?
Is this how it currently works?
I believe this is how the US tax system now works for corporations with off shore profits
Yes, the change that Trump made was to allow US corporations to repatriate profits from overseas without incurring a tax liability. The idea being to encourage multinationals to use the funds to invest in US facilities and jobs.
Frankly I think this idea is dumb. Corporations are pass-through vehicles and ultimately cannot pay taxes. They are simply another business cost that is inevitably passed through in the form of higher prices, lower pay and benefits for its workers or hits to shareholder returns that reduce pensions. In other words they do not pay this, we do. Things do not pay taxes; people do.
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Re: G7: Rich nations back deal to tax multinationals
odysseus2000 wrote:many of the smaller countries will not be members of G20 and thereby not forced to adopt G20 policy, so what changes?
Currently, most of the world's corporate tax havens are either small EU countries or British crown dependencies. So I suspect they will come under considerable pressure from their masters to step into line.
Of course, there was no need for a G20 agreement to tell them to do this. Maybe it is just a tool to allow UK/EU to say "but we have to enforce this on you"
Quite what the Cayman Islands (pop 65k) is going to spend its billions in tax revenue on is a little concerning. Wish I owned the Rolls Royce dealership there.
Gryff
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Re: G7: Rich nations back deal to tax multinationals
The big question of course is whether this sort of thing can be enforced anyway. I should imagine that there is a long way to go in this discussion.
Dod
Dod
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Re: G7: Rich nations back deal to tax multinationals
Snorvey wrote:Surely there will always be a country willing to be a tax haven.
No doubt. But would you want to lodge your business cash in some dodgy third world dictatorship? History suggests you’d be safer paying the tax somewhere safe where govts and civil servants wouldn’t filch it. So to be a useful tax haven, you need political and civil stability. And countries with that are much easier to pressure into conforming with the rules.
Gryff
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Re: G7: Rich nations back deal to tax multinationals
The tax rules were such that a company could have enormous sales in country A but be taxed as if the profit on those sales occurred in country B. In this anachronistic system, the profits were taxed where the contract for the sale took place, rather than where, say, the goods were stored and delivered. The companies used this distinction to locate profits in favourable jurisdictions, typically Ireland or Luxembourg.
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Re: G7: Rich nations back deal to tax multinationals
bluedonkey wrote:The tax rules were such that a company could have enormous sales in country A but be taxed as if the profit on those sales occurred in country B. In this anachronistic system, the profits were taxed where the contract for the sale took place, rather than where, say, the goods were stored and delivered. The companies used this distinction to locate profits in favourable jurisdictions, typically Ireland or Luxembourg.
Pretty sure that’s just an EU open-market loophole.
Generally corporations have to jump through a few hoops to move profits internationally. Historically this involved tricks such as charging subsidiaries £50 for a single bolt from the low tax source. These days it’s easier to charge intangibles such as advertising, websites or licensing royalty payments. I’m not saying it’s particularly difficult. Just not quite as easy as you claim.
Gryff
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Re: G7: Rich nations back deal to tax multinationals
It's due to the wording of double tax agreements, in particular the definition of "permanent establishment".
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Re: G7: Rich nations back deal to tax multinationals
gryffron wrote:Snorvey wrote:Surely there will always be a country willing to be a tax haven.
No doubt. But would you want to lodge your business cash in some dodgy third world dictatorship? History suggests you’d be safer paying the tax somewhere safe where govts and civil servants wouldn’t filch it. So to be a useful tax haven, you need political and civil stability. And countries with that are much easier to pressure into conforming with the rules.
Do you claim to notice a pattern whereby tax havens are more tin-pot banana dictatorships than other places? Tax havens that come to my mind are Bermuda, Luxembourg, Switzerland, Gibraltar, Jersey and the Isle of Man. Hardly out-of-control basket cases.
With taxes, as with anything else, I think it is healthy to have competition. If every nation has the same tax rate then to me that smacks of a monopoly and a cartel.
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Re: G7: Rich nations back deal to tax multinationals
I guess the big loser with this will be Ireland. Apple won't be able to avoid tens of billions in tax by just shunting it all through their Irish subsidiary.
OK Ireland aren't in the G20 but France and Germany will force this through at the EU level.
OK Ireland aren't in the G20 but France and Germany will force this through at the EU level.
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Re: G7: Rich nations back deal to tax multinationals
scrumpyjack wrote:I guess the big loser with this will be Ireland. Apple won't be able to avoid tens of billions in tax by just shunting it all through their Irish subsidiary.
OK Ireland aren't in the G20 but France and Germany will force this through at the EU level.
But can the EU force specific tax rates on its member states?
Luxembourg has low tax rates and has been in the EU/CM since 1958, seemingly without a problem.
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Re: G7: Rich nations back deal to tax multinationals
Lootman wrote:scrumpyjack wrote:I guess the big loser with this will be Ireland. Apple won't be able to avoid tens of billions in tax by just shunting it all through their Irish subsidiary.
OK Ireland aren't in the G20 but France and Germany will force this through at the EU level.
But can the EU force specific tax rates on its member states?
Luxembourg has low tax rates and has been in the EU/CM since 1958, seemingly without a problem.
In theory they can't mandate tax rates on member countries, but in practice it could be pushed through by the 'rulers' of the EU (Germany and France) through moral and other pressures.
Although thinking about it the Irish might even benefit because a 15% rate would still be the lowest in the EU and having set everything up Apple are unlikely to move, so the Irish might well get a lot more corporation tax! Same goes for Luxembourg.
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Re: G7: Rich nations back deal to tax multinationals
Well given that the market indexes didn't bat an eyelid when they opened on Monday morning, I can only assume that smart money assumes the proposals/discussions to be toothless.
On a sidenote it seems both the US and the UK are already looking for exemptions:
British finance minister Rishi Sunak is pushing for financial services firms to be exempt from a new global tax system which was agreed last week by the Group of Seven (G7) economies, sources familiar with the negotiations said.
One of the officials said Britain - home of Europe's biggest financial hub - had put a carve-out for banks and other finance firms on the table in technical discussions over how to make the plan work.
G7 finance ministers on Saturday announced that they had agreed on a system to make multinationals pay more tax in countries where they operate, alongside a minimum global corporate tax rate of at least 15%. read more
The deal was hailed as a sign of renewed global cooperation by the United States under President Joe Biden who is due to arrive in Britain on Wednesday ahead of a summit of G7 leaders.
But the United States is opposed to any push that specifically targets U.S. tech companies while Britain is keen to avoid another hit to its banks after Brexit cost them access to markets in the European Union.
Source https://www.reuters.com/world/uk/uk-pus ... 021-06-09/
On a sidenote it seems both the US and the UK are already looking for exemptions:
British finance minister Rishi Sunak is pushing for financial services firms to be exempt from a new global tax system which was agreed last week by the Group of Seven (G7) economies, sources familiar with the negotiations said.
One of the officials said Britain - home of Europe's biggest financial hub - had put a carve-out for banks and other finance firms on the table in technical discussions over how to make the plan work.
G7 finance ministers on Saturday announced that they had agreed on a system to make multinationals pay more tax in countries where they operate, alongside a minimum global corporate tax rate of at least 15%. read more
The deal was hailed as a sign of renewed global cooperation by the United States under President Joe Biden who is due to arrive in Britain on Wednesday ahead of a summit of G7 leaders.
But the United States is opposed to any push that specifically targets U.S. tech companies while Britain is keen to avoid another hit to its banks after Brexit cost them access to markets in the European Union.
Source https://www.reuters.com/world/uk/uk-pus ... 021-06-09/
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