[Global] France sees possible compromise on minimum tax rate of 15%

On October 5, French Finance Minister Bruno Le Maire said global talks to rewrite the rules for taxing cross-border business are at a critical phase and suggested that a compromise is possible on a minimum corporate tax rate of 15 per cent, Nasdaq reports.

140 countries reportedly intend to finalise the first major overhaul in generations of the rules for taxing multinationals. The meeting will take place on October 8 so that the deal can be endorsed by the Group of 20 economic powers later in the month.

Speaking to journalists Le Maire said, "A definitive agreement on international taxation for the 21st century is at hand, it's now or never." 

Until now 134 out of 140 countries involved in the talks had backed a minimum rate of "at least" 15 per cent, however, Ireland - which has lower taxes in comparison to others - has until now refused to sign up expressing concerns the rate could end up being higher than 15 per cent.

Le Maire, who had previously pushed for a higher rate, said that while a compromise on the 15 per cent figure was possible, there continued to be a major blocking point over how big a deduction from the global minimum should be possible for multinationals based on their assets and payroll in foreign markets.

"It's not the rate that is the biggest problem, Ireland's position is evolving on this subject and a compromise can emerge at 15 per cent as the real effective minimum taxation," Le Maire said.

The minimum rate is intended to discourage multinationals from booking profits in low-tax countries like Ireland, which has a corporate tax rate of 12.5 per cent, regardless of where their end customers are.

However, some countries such as Poland and other eastern European countries want a large deduction from the minimum rate to reflect real corporate activity because they frequently offer reduced rates to entice foreign investors to build plants.

According to Le Maire, France supported a deduction that would be based on 7.5 per cent for assets and 10 per cent for payroll over a 10-year transition period.

Once an agreement has been reached governments would be expected to bring the new rules onto their statute books next year so that they take effect in 2023.

On October 5, French Finance Minister Bruno Le Maire said global talks to rewrite the rules for taxing cross-border business are at a critical phase and suggested that a compromise is possible on a minimum corporate tax rate of 15 per cent, Nasdaq reports.

140 countries reportedly intend to finalise the first major overhaul in generations of the rules for taxing multinationals. The meeting will take place on October 8 so that the deal can be endorsed by the Group of 20 economic powers later in the month.

Speaking to journalists Le Maire said, "A definitive agreement on international taxation for the 21st century is at hand, it's now or never." 

Until now 134 out of 140 countries involved in the talks had backed a minimum rate of "at least" 15 per cent, however, Ireland - which has lower taxes in comparison to others - has until now refused to sign up expressing concerns the rate could end up being higher than 15 per cent.

Le Maire, who had previously pushed for a higher rate, said that while a compromise on the 15 per cent figure was possible, there continued to be a major blocking point over how big a deduction from the global minimum should be possible for multinationals based on their assets and payroll in foreign markets.

"It's not the rate that is the biggest problem, Ireland's position is evolving on this subject and a compromise can emerge at 15 per cent as the real effective minimum taxation," Le Maire said.

The minimum rate is intended to discourage multinationals from booking profits in low-tax countries like Ireland, which has a corporate tax rate of 12.5 per cent, regardless of where their end customers are.

However, some countries such as Poland and other eastern European countries want a large deduction from the minimum rate to reflect real corporate activity because they frequently offer reduced rates to entice foreign investors to build plants.

According to Le Maire, France supported a deduction that would be based on 7.5 per cent for assets and 10 per cent for payroll over a 10-year transition period.

Once an agreement has been reached governments would be expected to bring the new rules onto their statute books next year so that they take effect in 2023.