The fight to reform multinational taxation promised to be Homeric. At this level it already delivers what it promises. The project, adopted on October 6, 2021 under the aegis of the Organization for Economic Co-operation and Development (OECD) by 140 countries after five years of debate, has raised many hopes. States finally have a chance to retake control of these big corporations that have made tax optimization an integral part of their strategy for decades. This includes making the attractiveness of tax havens obsolete by setting a global minimum tax rate. Eight months later, the difficulties in implementing this tax revolution are mounting and making its outcome uncertain.
The implementation of a minimum levy of 15% on the profits of large companies into European law was vetoed by Hungary on Friday 17 June, breaking the unanimity of the 27 member countries required for an OC.
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Budapest, which initially agreed, now believes such a tax “would cause serious damage to European economies.” It should not have escaped anyone’s notice that the European Union (EU) is continuing to block payments to Budapest as part of the European economic stimulus package and that Brussels is accusing the country of not doing enough to fight corruption. The French EU presidency has given itself until the end of June to try to get Hungary to give up its veto.
short-sighted strategy
The instrumentalization by Hungary and Poland (who eventually turned against the text) of making this tax reform a bargaining chip to obtain concessions from the EU on other issues is not the height of a project’s historical dimension broadly supported by public opinion. They no longer accept that multinational corporations do not pay their fair share of taxes.
The example of McDonald’s, which has just received a €1.2 billion adjustment for evading French taxation by transferring most of its profits to the Netherlands and Luxembourg, only underscores the urgency of changing the rules of the game, if these two countries had implemented a minimum tax, the American fast food giant would not have been tempted by this tax optimization.
At a time when growth is slowing, inflation is accelerating and interest rates are rising, making it more expensive to repay debt, governments need to secure the fiscal revenues that are rightfully theirs in the form of corporate income taxes. More than ever, promoting tax dumping is a short-sighted strategy, while governments need to invest colossal sums in the energy transition in particular.
In the United States, too, reform of the taxation of multinational companies is struggling to gain acceptance. His fate is linked to a social and ecological recovery plan that Joe Biden is trying in vain to enforce. If an agreement with the Republicans is not reached quickly, a defeat for the Democrats in the midterm elections would be fatal for the ratification of the global tax law.
This reform is at a turning point as multilateralism loses momentum and each individual gains the upper hand. It is crucial that the countries that have accepted the principle stick to its implementation. The obstacles remain numerous. But abandoning them would only fuel surrounding populism and create the disastrous impression that the multinationals have won the battle once again.