A proposal to be tabled by US President Joe Biden at the next G7 meeting for a global corporate tax rate of 15% could bring the EU 50 billion euros (43 billion pounds) a year , and earning the UK almost an additional 200 million euros from the British multinational BP alone, according to an investigation.
If the tax rate were set at 25%, the current lowest rate within the world’s seven largest economies, the EU would earn an additional € 170 billion a year, more than 50% of current corporate tax revenue and 12% of total health spending in the block.
Among UK-based multinationals, it is claimed that BP’s corporate tax bill would increase at that rate by € 484.9 million, Barclays by € 911 million a year and HSBC by € 4.2 billion.
The The estimates will be published on Tuesday by a new group of experts funded by Brussels, the EU Tax Observatory., which models the “fiscal deficit” of multinationals, defined as the difference between current tax payments and amounts owed if global profits were subject to the same rate wherever they are recorded.
Under Biden’s proposal, multinational corporations would be prevented from transferring profits across borders to exploit the most attractive locations with low taxes, as their profits would be taxed at a minimum global corporate tax rate, whether where they are registered or have its headquarters.
The Biden administration initially proposed a rate of 21%, but last week revised the target down, saying that it should be “at least” 15%, although the White House considers it a “floor” and that the discussions should continue to boost that rate.
UK Chancellor Rushi Sunak is understood to be skeptical of the higher levels proposed for a minimum corporate tax rate, while expressing his support at the outset. The Treasury has said it is concerned that the policy could lead to economic activity in the UK being taxed elsewhere. The UK has the lowest corporate tax rate in the G7 at 19%, although it will rise to 25% in April 2023.
Gabriel Zucman, director of the EU Tax Observatory, said resistance from the UK and others like Ireland, which has a 12.5% corporate tax rate, shouldn’t hold back others.
He said: “Now the argument people use is, ‘Oh, but Ireland doesn’t want more than 15%, the UK doesn’t want more than 15%.’
“But that does not prevent countries that want to be more ambitious from signing an agreement in which they say to their own multinationals: ‘We are going to impose a minimum tax of 25% on your country for the country’s profits so that even if we tax your profits In Ireland, we Germany, the United States, France, we are going to charge the 15% that remains to reach 25%. And you know what Ireland can do absolutely nothing, they will uphold the correct law, but that is offset by higher taxes in the countries of origin. “
The EU Fiscal Observatory’s analysis of multinationals’ fiscal deficits is restricted to those who publish profits on a country-by-country basis, a policy that has likely been rejected by the biggest tax evaders.
However, it found that if the minimum corporate tax rate were set at 25%, EU governments would have made € 12 billion more in 2019 from banks based in the 27 countries alone, meaning that European banks they would have to pay about 45% more in taxes.
The study also suggests that the EU would benefit even if it went on its own by applying a minimum tax rate on the profits of non-EU multinationals, and an additional € 30 billion is expected to be raised by collecting a portion of the “fiscal deficit” between what is being paid. globally and the rate of 25%.
Zucman said: “Even if there is a global agreement on taxes, there is nothing to prevent the EU, and more importantly, even an EU country unilaterally or a group of EU member states, from being more ambitious in saying : ‘We are going to apply a rate of 25%.
“And if they did, and not only did, but also collected part of the fiscal deficit from foreigners, a race to the top would be launched.
“With a 25% minimum tax, which is nothing extraordinary for the EU, it will generate 1.2% of GDP in additional revenue. So I’m not saying it’s enough to pay for Covid and all, but you know what, it could be a big part of a plan for public finances after the crisis. “
George is Digismak’s reported cum editor with 13 years of experience in Journalism