Wednesday, August 17

G20, trick or treat (prosecutor)

The G20 heads of state will give support on Sunday to the proposal to reform the international tax system. An agreement that has been meant to be historic, because it introduces two elements that break with the status quo of design known in the almost ten decades since it was designed. On the one hand, it breaks with the idea that the tax bases of global mega corporations can only be considered as national, to begin to redistribute a part (small, 25%) of the global super benefits above 10% profitability to target markets. Thus, the impossibility of taxing large operators is reversed that with the digitization of the economy and the media can operate from outside the territory, but maintaining a total absence of fiscal presence. The “trick” is that it is an agreement measured by what the House of Representatives will be able to accept, applying to less than 100 mega-corporations around the world and hardly generating additional income for developing countries. Oxfam has calculated, together with the consultancy Oxford Economics, that the 52 poorest countries on the planet will earn just a few crumbs, 0.002% of GDP in additional income, for some countries an additional 1 million euros.

The counterpart, on the other hand, is very high, because it obliges the signatory countries not to implement unilateral measures such as the “Google rate” as of October of this year. Spain along with 4 other countries (United Kingdom, Italy, Austria and France) have agreed on a transition plan with the United States that will lift trade sanctions in exchange for the withdrawal of this type of taxes on various digital services from now on to 2023. A severe limitation on national sovereignty that also leaves up in the air the proposal of the European Commission that aspired to propose a digital tax initiative (or “digital levy”) before the end of the year as a way to generate resources to provide own funds the community budget. The EC now has an elegant exercise of innovation and creativity to meet its objectives, something that has never been easy due to the rule that requires unanimity in making tax decisions in the European framework.

The second element is perhaps the one that has been talked about the most, the idea of ​​setting a minimum of 15% in business taxation. Undoubtedly bad news for the most aggressive tax havens, those of 0% (there are still 13 territories on the planet with zero taxation in business taxation), but a concession from the rest of the countries to countries as fiscally aggressive as Ireland or Singapore. Because really, the low level of ambition reached here has been dictated by the interests of Ireland that threatened not to validate the OECD and G20 agreement and therefore also torpedo any possibility of future European consensus. Why is it not so historical in this dimension either? In fact, it is essentially unfair in its design. Two-thirds of what can potentially be raised by this global minimum will go to the rich countries, the G7 and the EU, because only the countries where the parent companies of the large corporations are will be able to activate that 15% minimum rate. If a large Spanish company has a subsidiary in Argentina but controlled from another subsidiary in Ireland to which it diverts a large part of its profits, only the Spanish AEAT may claim the difference between the effective rate paid in Ireland to equal it with 15%. For Argentina, there will be no direct benefit left, but fingers crossed hoping that in the future the Spanish company will not have any more incentives to continue using the Irish bridge.

According to the European Taxation Observatory directed by Gabriel Zucman, this global minimum of 15% could contribute 5.2 billion euros to Spain. It is not an additional 5,200 million euros, but income that we would stop losing because now, the weaknesses of the international frameworks make the controls ineffective to retain those tax bases.

But in reality, they can stay in much less. Another of the big holes in the agreement is the definition of the base on which this 15% minimum rate will be applied, allowing up to 10 years of transition period in which considerable exclusions can be applied in ad-hoc tax treatments that could leave 15% of global minimum reduced by 30% in net terms. In the words of the director of fiscal affairs of the EC, Benjamin Angel, 90% of the discussions of the European partners in the process have focused on amplifying as much as possible the possibility of applying these exclusions. In fact, Spain seems to be the country that could lose the most revenue in relative terms of the OECD countries

It has not escaped anyone that the tax treatment of large corporations, in their global operations, has been watering up until now and that the accelerated digitization of the economy has made it absolutely nonsense. Reaching an agreement was certainly an urgency in terms of even fiscal honesty if that could be considered. But this is not the agreement that after eight years of negotiations we should have reached. The one that Ireland and the United States have imposed. The one that the financial sector, which is left out, has managed to negotiate. Try and trick.