Global tax talks race to resolve hurdles as time runs out

OECD-LED group aims to resolve issues by Oct 8 gathering

The 140 countries attempting to conclude years of negotiations to overhaul global tax rules for an increasingly digitised economy are racing to resolve key details against a ticking clock. With just over a week until an October 8 meeting of all the governments involved, negotiators are still wrestling over parameters of setting a global minimum corporate tax and sharing the spoils from levies on tech giants like Facebook and Alphabet’s Google, according to people familiar with the matter.

They are also trying to work out how the global deal will coordinate countries on halting new unilateral digital taxes and unwinding existing measures — a hot-button issue for governments seeking to protect revenues, and for the US, which sees such levies as discriminatory against its firms.

Hanging over the talks is uncertainty over whether the US could actually make good on any kind of agreement after a leading Republican senator, Patrick Toomey, said this week that Congress probably would block ratification.

Taken together, the hurdles threaten the goal of the Biden administration and the Group of 20 advanced economies to end a revenue-eroding race to the bottom of offering ever-lower taxes to lure business investment.

And more broadly, the OECD, which is attempting to broker a deal, has warned failure would lead to a cocktail of unilateral digital levies and trade and tax disputes that could strip more than 1 per cent off global economic output annually.

In the run-up to the October 8 meeting of all the countries involved, Group of Seven finance ministers, who have shaped the talks at key moments, met Wednesday on a conference call. The UK, which currently chairs the group, said there was “a common understanding” on some important issues and a commitment to implementation. But nations stopped short of specifying positions on the headline numbers that will shape the deal.

“The conversation was constructive and we have made a lot of progress on important points,” French Finance Minister Bruno Le Maire said in a statement to Bloomberg News. “Let’s not let the opportunity get away for a major deal next week. We can get there.”

The talks are split into two separate streams. The first, known as

Pillar One, aims to reallocate some tax revenue from where multinationals book profits to where they have sales, while Pillar Two seeks to create a global minimum corporate tax rate.

On Pillar One, while there is agreement that some profits of the biggest multinationals should be reallocated, the exact amount remains at issue, according to people familiar with the talks.

The July statement set a range of 20 per cent to 30 per cent of profits above a 10 per cent margin to be reallocated. Some developing countries, notably from the Group of 24, which includes Brazil, India, and Nigeria, have called for the number to be not less than 30 per cent. France has proposed a compromise at 25 per cent. Wrapped up in that tussle is the question of how and when national digital taxes will be rolled back as countries start to receive fresh revenues under the new rules, and when governments must agree to stop introducing new unilateral measures.