Supported by US President Joe Biden, the proposal for a minimum tax rate of 15% hit the turmoil after the Irish Minister of Finance expressed “significant reservations” on the subject.
“The change of administration (US) offers a historic opportunity… and we must seize the opportunities when they arise. It’s now. Now is the time to act, ”insisted French Finance Minister Bruno Le Maire at a forthcoming joint press conference. of the next Franco-German Economic and Financial Council.
His German counterpart Olaf Scholz said he was “optimistic” about the chances of sealing an agreement which he said would put an end to “disastrous tax competition” between countries.
“We are on the verge of concluding an international agreement” which will lead to “a revolution in international corporate taxation,” added Scholz.
Biden’s administration last week called for an agreement on a unified tax rate of at least 15% in negotiations with the Organization for Economic Co-operation and Development (OECD) and the G20.
But on Tuesday Irish Finance Minister Paschal Donohoe said the country had “a really big concern” about a global rate which meant “only certain countries, and certain size economies can benefit from this base”.
The objection carries weight as Ireland is home to an inordinate number of tech and pharmaceutical companies that have been drawn to the country for its lower tax rate.
Last month, the Dublin Department of Finance released a projection that it could lose two billion euros ($ 2.4 billion) each year in revenue from 2025 if a global minimum tax rate were adopted. .
Donohoe’s concerns were echoed by Hungary’s Foreign Minister during a trip to Dublin on Tuesday.
“Like Ireland, Hungary is in favor of a low level of taxation,” said Peter Szijjarto.
Malta also has an uncompetitive corporate tax rate.
Ireland’s corporate tax rate is currently 12.5% and Hungary’s 9% – while France and Germany impose rates of almost 30%, according to OECD calculations.
Luxembourg, which is also home to a myriad of multinational corporations, has called for “minimum taxation” to create “the conditions for fair competition” between countries – but has not commented specifically on the rate. proposed 15 percent.
Finance ministers from the G7 group of advanced countries – made up of Germany, Canada, the United States, France, Italy, Japan and Britain – are due to meet next week in London, where they could approve the US proposal.
The Mayor said that he, Scholz and British Chancellor of the Exchequer Rishi Sunak had agreed to do “everything possible” to reach an agreement at the meeting.
They will then build on this during the biggest G20 session in July in Venice, said Le Maire, adding that “step by step, we will succeed in convincing all our partners”.
The IMF leader also offered her approval to the plan on Tuesday.
CFOs have called a minimum tax necessary to stem competition between countries on who can offer multinationals the lowest rate.
They say the “race to the bottom” is undermining revenue that could go to other government priorities.