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Global minimum tax deal on multinationals set to fail, G7 chair says

Tan KW
Publish date: Fri, 24 May 2024, 05:48 PM
Tan KW
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STRESA, Italy An accord over a global minimum tax on multinationals will not be finalised by June as previously planned, Italy's Economy Minister Giancarlo Giorgetti said ahead of a Group of Seven (G7) finance summit starting on Friday.

Giorgetti, who chairs the gathering as Italy holds the G7 presidency this year, said that the US, India and China all have reservations over the terms of the deal.

The tax is aimed mainly at US-based digital giants, with a so-called "first pillar" aimed at reallocating taxing rights on about US$200 billion of corporate profits to the countries where the companies do business.

Speaking to reporters in Stresa, northern Italy, Giorgetti said on Thursday the deal would not be ratified by all countries that were due to participate in a multilateral signing convention next month.

"That work will not be completed, this is not a good thing," the minister said.

Italy said last week it would promote last-ditch talks to prevent the failure of plans.

The first pillar would have made it possible to overcome a dispute that has seen the US threaten retaliatory tariffs against European countries, such as Italy, which have announced or adopted domestic digital taxes.

US trade authorities have threatened 25% tariffs on more than US$2 billion worth of imports from Italy, Austria, Britain, France, Spain and Türkiye, from cosmetics to handbags.

Italy wants to negotiate an agreement with Washington that would stop these tariffs, which are temporarily frozen until June, while also keeping its levy in place, an official told Reuters on Friday.

The government wants to draw other European countries into the negotiations with Washington, as Rome believes that a common approach at the European Union level would be more effective, the official added.

Italy introduced a 3% levy in 2019 on revenue from internet transactions for digital companies with sales of at least €750 million , at least €5.5 million of which are effected in Italy. Rome raised around €390 million in 2022 from the tax.

While the first pillar is stuck, countries are implementing the second pillar of the global minimum tax deal.

That part of the accord tries to ensure companies with revenue greater than €750 million pay a global minimum rate of 15% by allowing governments to apply a top-up tax on revenues earned in countries with lower rates.

 


  - Reuters

 

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