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France chooses the wrong tax war with America

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Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.
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French Finance Minister Bruno Le Maire wants the help of US President-elect Joe Biden in corporate tax reform. Unfortunately, you are doing it the wrong way.

Le Maire expects Biden to unfreeze global negotiations that have been stalled since June. France, Britain, Spain and Italy would like digital giants like Amazon and Google’s parent company Alphabet to pay taxes in part based on where sales are made, rather than where profits are declared. The current regime allows technology companies to transfer the profits generated in, for example, France, to countries with lower taxes such as Ireland and Luxembourg.

The new approach will be as difficult for Biden to accept as it was for his predecessors. The Barack Obama Administration, for example, helped liquidate an earlier attempt to adapt corporate tax rules to the digital age. The problem is that France and others are trying to raise money that could end up back in the coffers of the United States, for example, when technology companies move the money hidden in Ireland to the shores of the United States. The US and Britain introduce emergency digital taxes, most of which affect American businesses, in case the OECD-led talks fail.

There is a simpler option. Rather than focus on technology, governments could introduce a global minimum corporate tax rate. This would suit everyone except tax havens. America already has a similar measure in the so-called GILTI provision of its tax law. Le Maire, for example, could then take the difference between the agreed threshold and what French companies actually pay for reported profits in low-tax countries. It would end the incentive to pass on profits.

An OECD analysis suggests that introducing a floor tax rate would attract up to $ 70 billion outside the United States, and high-income nations like France would do particularly well. By comparison, the changes European countries want to see in the taxation of digital services would raise at most 12 billion worldwide.

It is possible to introduce a minimum tax without changing the rules for digital companies. Biden could probably handle it. France and other European countries, however, insist on linking the two ideas, not least because they made a political uproar over the taxation of Big Tech. The risk is that their dreams of digital wealth ruin the chances of a mutual compromise. beneficial, at a time when governments around the world are looking for revenue to cover budget deficits.

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