Joe Biden Unblocks The Gafam Tax

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Biden administration has just unblocked two major negotiations within the OECD: the tax on digital giants and the minimum corporate tax. Two files that Trump was blocking. Janet Yellen, the new Secretary of State for the Treasury, has put on the table of the G7 / G20 some very interesting proposals which join the French and German proposals.

“A tax revolution is within reach”, rejoiced Bruno Le Maire during a telephone press briefing on Thursday afternoon, while stressing that his services continue to study the American proposals. First step forward: Washington is proposing to create an international tax on the digital giants by distributing the income from the tax on the turnover made “country by country”. The tax would be based on net income and not on turnover, unlike the Franco-German proposal. This means that the Americans are taking over the country-by-country approach while refining the system. “It’s a fairer system, but we have to make sure that no giant escapes taxes. Our services are studying the issue, ”said the French Minister of the Economy.

Conclude before the departure of Angela Merkel

The Biden administration also rallies to the European idea (supported in particular by the Germans) of a minimum corporate tax and proposes a rate of 21%, where Europe offered only 12.5%. This high rate leaves the French minister skeptical, who is waiting to see if the American Congress will support the ambitious intention of the American president. In Europe, the Irish will probably not be the last to refute such a high rate …

The negotiations must take place within the confines of the OECD and be concluded fairly quickly next summer. The timing is essential, because, after the summer, Germany will enter a phase of electoral campaign not conducive to such important discussions. And after Germany (legislative on September 26), it is France which in turn, in the first half of 2022, will begin the presidential campaign. In short, the window of opportunity is narrow for a dossier as technical and as important as the establishment of a new system of international taxation adapted to globalization.

The next decisive weeks at the OECD

The system of taxation of Gafam, proposed by the Americans, is simpler than that proposed by the OECD which wanted – a difficult task – to distinguish, in the income of companies, the share of digital activities from those resulting from physical exchanges.

The American proposals have, on the whole, been the subject of a positive evaluation by European leaders. Bruno Le Maire met with his German counterpart, Olaf Scholz, with his Italian counterpart, Daniele Franco, as well as with the Commissioner Paolo Gentiloni, in charge of taxation. Discussions in the coming weeks within the OECD will be decisive. “It is now that we must conclude”, underlined Bruno Le Maire, after four years of a long and difficult battle, first within Europe, then against a hostile Trump administration and using arguments delaying.

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