The minimum corporate tax on a global level, the need for which US President Joe Biden strongly insists, would primarily benefit Europe. It is no coincidence that the issue will end up on the table at the next meeting of the finance ministers of the G7 countries, scheduled for Friday 4 and Saturday 5 June in London. To quantify the benefits of global corporate tax is a study by the European Tax Observatory, created two months ago and hosted at the Ecole d'économie in Paris: “Depending on the rate that will be decided and the possible scenarios, European tax revenue could increase in a range between +13 and +50%”, explains Gabriel Zucman, a young French economist at Berkeley and director of the Observatory.
The need for a minimum tax was dictated by the Covid pandemic, which sanctioned the new centrality of public institutions but at the same time it is drying up state budgets. In fact, European countries have been forced to intervene very energetically to protect jobs and social cohesion, and the cost of this operation will only be partly borne by the aid from the Recovery Plan, most of which will in any case go towards constituting new public debt. This is why the issue of increasing tax revenues arises all right. Today, companies are free to choose their tax base, and naturally, tax havens like Luxembourg or Ireland are preferred in Europe (which, in fact, not by chance opposes Biden's plan).
The global minimum tax on the other hand, which in truth has been indicated as a priority by the OECD since 2019, would impose a minimum rate below which no one can fall, in order to level the benefits for a greater number of countries and also to remodulate the tax according to the profits actually made by the company (especially by the multinational) in this or that country. The central theme is: at what level to set the rate? Biden is very ambitious and initially proposed 21%, however considered very high by some countries. Consider, for example, that in Ireland today, corporate tax is just 12,5%. That's why the latest White House raise is for a global minimum tax rate at 15%.
With this scenario (15% tax rate), European tax revenues would grow by 50 billion each year, a good but not so interesting figure for a continent of 27 countries and over 300 million inhabitants. While if hypothetically (very unlikely) we end up arriving at a tax of 25%, which it simply is the currently lowest rate among the G7 countries (with the exception of the United Kingdom which is at 19%), revenues would increase by the maximum percentage envisaged by the Observatory, +50%, and therefore in absolute terms by 170 billion euros each year. Zucman has no doubts about the resistance of Ireland and other countries with subsidized tax regimes: "Ireland's no should not keep the other countries from reaching an agreement in any case".
“Countries such as Germany, France, the USA, Italy – argues the director of the European Tax Observatory - should say: 'We will impose a minimum tax of 25% on profits, so that even if companies tax their profits in Ireland, we we will collect the missing 15%. to reach 25%'. And do you know what Ireland can do? Absolutely nothing, they will keep their just law, but it will be compensated by higher taxes in other countries where big corporations do business".
