The members of the G7 have reached an agreement to end tax relocation. This technique allows large companies like Google, Facebook or Apple to only pay taxes in the country where they have their headquarters, which is usually a country with a lower tax burden.
Thus, these companies are, for example, established in Ireland and only pay taxes in this country for all the profits they make in the rest of the European Union. This country has a lower tax burden and the other European countries do not obtain taxes for the businesses that these multinationals do in their territories.
Countries G7 members (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) have agreed that the tax percentage can be higher than 20% when the profit margin of that company is greater than 10% in a country. Otherwise, the percentage will be 15%, a figure proposed by the United States in the face of European pressure that asked for up to 21%.
The United States has been the country that has resisted the most to this agreement for years since its companies are the ones that benefit the most from fiscal relocation. In January 2020, Google promised to stop the practice known as “the double irish“, with which it established a subsidiary based in Ireland or the Netherlands and, at the same time, created another subsidiary in another territory, a tax haven or another country with lower taxes.
At the same time that the negotiations were taking place, the Google Tax was promoted in Europe for which countries such as France, Italy or Spain established a 3% tax on digital income of these large companies that had more than 750 million euros in annual revenue and digital services of more than 5.5 million.
The G7 agreement reached by these countries is not binding, but it represents an important step for countries with such international weight to reach this decision. Next weekend the pact will be ratified in a second meeting and could be a boost for the similar negotiations that are being discussed in the G20 and the Organization for Economic Cooperation and Development (OECD).
To this we must add the latest agreement presented in the European Union that obliges companies that invoice more than 750 million euros per year, for two consecutive years, to present a public report detailing the benefits obtained and the fees paid.