Editorial of the “World”. A deal on global multinational tax reform is at hand. The Organization for Economic Cooperation and Development (OECD) has just defined a framework aimed at finally adapting corporate taxes to the challenges of globalization and the digital economy. This is a major initiative, which was presented on Wednesday 14 October to G20 finance ministers. Unfortunately, the talks, which concern 137 countries, are deadlocked, due to the procrastination of the United States.
This project is a historic opportunity, which should not be wasted. The stakes are twofold. First, public opinion, shocked by the proliferation of revelations about the optimization practices of multinationals, calls for more tax fairness. Then, states cannot afford the luxury of giving up legitimate budget revenues, while the crisis linked to the Covid-19 pandemic has caused public deficits to explode.
The reform is based on two pillars. The first is to define new criteria to tax the digital activities of multinationals. These would now be taxed where they generate their business, and no longer where their head office is located – most of the time in a country with a favorable tax framework. The second aims to establish a minimum rate of tax on profits worldwide. This provision would de facto eliminate the attractiveness of tax havens.
The financial stakes are far from negligible. The first part of the reform would redistribute a shortfall of 85 billion euros, which, to date, has evaporated in favor of tax havens and countries which practice tax dumping. With the introduction of a minimum tax rate, the OECD has calculated that nearly 80 billion more would go into the coffers of states looted thanks to these tax tricks.
The idea of corporate tax reform has been gaining ground for years, despite many obstacles. Losing patience, some states like France have sought to set up their own tax on GAFA profits (Google, Apple, Facebook, Amazon), thus running the risk of being subjected to commercial retaliation from the United States. The French initiative nevertheless had the virtue of serving as an incentive for Washington to agree to participate in multilateral negotiations.
Noting that the American authorities continue to be reluctant to accept this reform, Paris says it is ready to start levying its own GAFA tax. This initiative is not illegitimate, but, by acting in isolation, France risks launching into a trade war for which it does not really have the means.
It would be better, first, to wait for the outcome of the US presidential election, to know what the intentions of the next administration are and under what conditions it would be ready to sign an agreement. The OECD initiative is too valuable to risk shattering it in the first blockage. The Europeans must both be patient, while developing an alternative strategy piloted by the Franco-German couple, in case the United States persists in refusing any development. One thing is certain: the introduction of a digital tax will only be effective if it takes place in a multilateral framework, at the level of the OECD or, failing that, at the level of Europe.