Map for Global Tax Revamp Runs From London to Rome, Via Venice
Japanese yen, U.S. dollar, and euro notes are arranged for a photograph. (Photographer: Tatsunori Misawa/Bloomberg News)

Map for Global Tax Revamp Runs From London to Rome, Via Venice

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Global talks to revamp the international tax system and impose a worldwide minimum corporate rate have gotten fresh life in recent months, and this week’s Group of Seven finance ministers’ meeting may provide additional momentum toward a broader deal in July or October.

Key details remain unresolved in the negotiations -- led by the Organization for Economic Cooperation and Development -- to re-imagine how the world’s richest corporations, including Facebook Inc. and Apple Inc., should be taxed.

The ultimate goal is to make the biggest companies pay more of their tax in the countries where they have sales, not headquarters, and stop competition among countries to attract business with low rates.

Here are the key milestones to watch:

June 4-5: G-7 finance ministers meet

The G-7 has seized an unexpected 11th-hour role in the talks, even though it doesn’t have direct authority to approve any deal. Officials from some of the world’s largest economies are keen to show progress this week in London, their first in-person meeting since the Covid-19 pandemic began.

European members of the G-7 say finding common ground in the smaller group is a prerequisite to a global accord and will give strong momentum toward a broader deal. French Finance Minister Bruno Le Maire said in May that any opponents to a global deal “will struggle to stand” if the G-7 and Group of 20 stand together.

The G-7 ministers are expected to release a communique on Saturday, though officials have telegraphed that the tax section may be more general rather than, for example, setting parameters for which companies will be subject to new tax rules.

“The starting point is to try to get political consensus, a high-level political commitment at the G-7,” said Manal Corwin, a former U.S. Treasury official now with KPMG. In the coming months, “they are going to need to provide a little bit more detail to get every country on board.”

June 30-July 1: Full OECD group meets

While the G-20 ultimately signs off on the deal, the OECD must first find agreement among the currently 139 jurisdictions that belong to the group’s “Inclusive Framework,” with a key meeting scheduled for Paris at the end of June.

That means winning over not just the biggest, richest nations, but also developing countries that haven’t had as much of a say while wealthier countries hash out the top-line details.

Map for Global Tax Revamp Runs From London to Rome, Via Venice

Developing countries are concerned the current version of the plan -- particularly the U.S. proposal to limit new taxes to only about 100 companies -- means they won’t see enough new revenue to make it worthwhile to implement the rules.

“At this stage, realistically, they’re trying to maximize whatever they can,” said Abdul Muheet Chowdhary, senior program officer at the South Centre, a developing-countries researcher.

July 9-10: G-20 finance ministers meet

This gathering in Venice represents the G-20’s latest self-imposed deadline to wrap up the tax talks, after a prior target in 2020 fell to the pandemic.

The G-20 finance ministers do have the power to sign off on a deal but any agreement in July may still lack key details.

On his final day as OECD secretary general on Monday, Angel Gurria said that the “outline of a deal” may come in July, followed by agreement on a “final package” in October.

Oct. 29-31: G-20 ministers, leaders meet

The Rome summit is when the participants will likely finalize further details of the plan and decide on any key issues that remain.

While some European officials have been talking up chances of a significant deal this summer, the OECD has been more conservative about when the concrete details will come together, particularly as some countries may first need to make changes to national laws

2022 and beyond: Reshaping laws, treaties

Even if there’s an accord in the coming months, it’s likely to take years to become reality. The OECD and G-20 have no power to enforce the final plan.

Negotiators will have to design the mechanisms -- such as legislative language, and a multilateral instrument to address treaty changes -- -- the countries will use to implement the deal. Then countries each must pass new laws and update treaties to reflect the changes.

Even for Europe and the U.S., who have led in brokering a deal, selling it at home could prove challenging.

Read more: McConnell Shows Who’s Boss After 9-Year Battle Over Tax Treaties

Changing tax policy for the European Union will likely require the unanimous backing of member states. That could be a significant hurdle, as some countries like Ireland and Hungary say the 15% minimum global tax rate proposed by the U.S. is too high.

In the U.S., Democratic lawmakers largely support the Biden administration’s efforts, but the party’s razor-thin majorities mean a deal has no room for error to pass Congress. In addition to legislation, implementing the plan will most likely require changes to tax treaties, which need a two-thirds vote in the Senate.

Republicans, who have expressed concern about the tax project, could retake majorities in the November 2022 midterm elections, meaning that any plan agreed to by Biden officials could languish indefinitely if it isn’t enacted into law by then.

©2021 Bloomberg L.P.

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