As any tax expert does not tire of repeating, in the matter of taxes the decisive things are those written in small print, perhaps in some addendum. It risks being so also with the revolutionary proposals of the Biden administration to put international taxation in step with globalization. In fact, there is a worm in the architecture of the proposal and, if you pretend not to see it, you also risk emptying the revolution.
France, Germany, Italy: this is why Europe would gain (more than the US) from a global minimum tax on multinationals
by Raffaele Ricciardi
The plan sketched by the White House consists of two pillars. The first consists in overcoming the digital taxes that have sprung up almost everywhere, especially in Europe. Basically, a sort of digital tax would be applied (such as those that are already entering into force in Italy, France, Great Britain) but in an international context: multinationals would pay taxes to the local tax authorities, based on the turnover that they achieve in the relevant country. What is the difference compared to the Italian or French digital tax? That the system would apply not only to Big Tech, but to a few dozen large multinationals, whatever their sector. So the American Facebook, but also, for example, the Italian Prada, the French Vuitton, the German Volkswagen. With this enlargement, Biden thinks it is possible to overcome the opposition of Congress to a taxation that would otherwise seem to affect only American companies.
The second pillar is a minimum global taxation for corporate profits that stops the tax dumping that pushes different countries to compete by offering multinationals increasingly favorable treatments: since 1980, when on average, in the world, they were just over 40 percent , taxes on profits fell to an average of less than 24 percent. But you can pay a lot less. Zero, for example, in the Arab Emirates or the Bahamas or the Channel Islands. Or torn rates just about everywhere. According to the latest tally, multinationals transferred $ 467 billion in corporate profits to tax havens in 2016, saving $ 117 billion in taxes. Biden is now proposing a minimum tax of 21 percent. In the current situation, it is an ambitious goal: the reform drafts on which the OECD, the organization of rich countries, was working, revolved around the hypothesis of a taxation of 12.5 per cent, the level at which countries such as Ireland, Cyprus and the Czech Republic, close to 10 per cent of Bulgaria or the levels of Hungary and Montenegro. In America itself, profits made abroad are, in fact, taxed at 10.5 percent. Insiders are betting on a final deal at 17 percent.
Property and global tax on multinationals. “But deeper reforms are needed to combat inequalities”
by Raffaele Ricciardi
The problem is that the shrewd tax offices of large companies have long been prepared for an offensive like this and have already found a way to circumvent it. The key word is “tax rulings”, that is the specific agreements, systematically very generous, that individual companies enter into with governments. The anti-Biden worm are, in fact, the tax regimes that companies cut out for themselves with tax rulings. These regimes can have miraculous effects on individual tax bills: sheltered from apparently demanding tax systems and even very severe tax rates, tax haven treatments proliferate. It is the most refined form of tax dumping, which can make that 21 percent rate a joke. It is precisely in Europe that these examples proliferate. Ireland, for example, has a 12.5 percent tax rate which would appear to be very accommodating to businesses. But Apple paid in Dublin, thanks to its tax ruling, only 0.005 percent. Luxembourg, Holland and Belgium have taxes on profits at a normal 25 per cent, but there are those who have agreed to reach 0.3 per cent in the first case, to 2.44 per cent in the second, to 2.9. percent in the third. Malta has a very strict tax rate of 35 per cent, but is willing to reach a compliant 5 per cent. If you don’t put a muzzle on tax rulings, the Biden reform risks becoming an empty box.
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