The tax evasion of large multinational corporations throws billions out of state coffers every year. While agreement to curb this phenomenon appears closer within the Organization for Economic Cooperation and Development, a study published on Tuesday analyzes the impact of a minimum corporate tax on collection. If a minimum of 15% is agreed internationally – the ratio on which consensus is most likely to be reached – the EU will enter an additional 48 billion dollars in 2021; If that percentage was 25%, then the community would have an additional 170,000 million, a figure that is 52% of what it currently receives in corporate tax. Spain, for its part, will raise its income by 1,000 million in the first case, and up to 12,400 million in the second case. This last number represents 44% of what is obtained today in corporate tax.
These are some of the conclusions reached by the first report of the Arab Republic of Egypt European Tax Monitor, A body attached to the Paris School of Economics and funded by community funds that opened this Tuesday. The entity, led by economist Gabriel Zucman, will publish five analyzes of European taxation between now and 2022, each with specific proposals addressed to community authorities. Economy Commissioner Paolo Gentiloni welcomed the observatory by reminding that at present, Europe is focusing on “post-pandemic recovery” and “on the massive investments needed to achieve green and digital transformations, every cent in the public treasury counts.”
The first of these works is titled Collecting the fiscal deficit of multinationals: a simulation of the European Union Prepared by Mona Barrack, Teresa Neff, Paul Emmanuel Chuck and Gabriel Zucman, they conclude that the minimum corporate rate of 15% globally is not very ambitious. But he adds that nothing prevents every country – or group of countries, for example a community block – from betting on the strongest. What is more, it believes that unilateral decisions can persuade other countries to follow the same path.
The document was released at a time when the United States, headed by Joe Biden, was in favor of raising the tax rate for multinational corporations, which over the past decades have lowered their taxes by shifting profits to tax havens and quasi-paradise thanks to more and more tricks. Complicated. This 360-degree shift in relation to the Donald Trump administration has revitalized talks within the Organization for Economic Co-operation and Development, which is responsible for seeking consensus among more than 130 countries to amend international rules and halt the race to the bottom in taxing societies. The agency hopes to reach an agreement this year on a lower rate and formula for large companies to pay taxes as they generate their profits, even if they do not have a physical presence in the region.
The United States raised the floor by 21% at the start of April, but lowered it two weeks ago to 15% when formalizing its proposal ahead of the OECD. The study published Tuesday simulates the impact of tax collection for a lower type of company in three different scenarios – an agreement between the European Union and the United States, minimum societal mass and unilateral decisions for each country – with a focus on Tax deficit (Financial shortfall) for multinational companies. This concept refers to the difference between the large groups that are taxed in each country and what they would have to pay as taxes if a minimum tax was set for their earnings.
In the first scenario, each European country would enter the financial deficit of its multinational companies on a country-by-country basis. For example, if a Spanish company pays an actual rate of 10% on its profits in Singapore and the agreed minimum rate is 25%, Spain can enter a 15% difference to ensure that the minimum rate is applied. With a minimum of 25%, which the authors deem most appropriate, the European Union will have revenue of 510,000 million in 2021 compared to the 340,000 projected for this year. Spain will generate an additional 12,400 million a year, 29,000 from Germany and 26,000 from France. In the US, the increase will be more than 165,000 million, equivalent to 44% of what you now collect in corporate taxes. If the threshold were 15%, the European Union would only increase its revenue by 50 billion. At 21%, you’ll get an additional 100,000 million.
The second scenario envisages an agreement at the European level, whereby countries combine the deficit of their multinational companies and part of the deficit of foreign companies based on the level of sales in each country. At a rate of at least 25%, additional collection in the European Union will increase by 200,000 million: 170,000 million from its own companies, equivalent to 12% of the Union’s spending on healthcare, and 30,000 million from non-EU groups. The study indicates that “the European Union, therefore, has greater potential for collection through increasing taxes on its companies than by imposing taxes on non-EU companies.”
The third hypothesis focuses on how much each country would collect if it unilaterally set a minimum rate. The first European country to create a floor by 25% will be able to increase revenue by about 70%. Spain will scratch an additional 16,700 million, 12,400 of them from its own companies, 700,000 euros from the United States and 3.6 billion from other foreign multinationals.
The study indicates that “if no international agreement is reached on a lower ambitious rate, it is possible that one country (or group of countries) may decide unilaterally to adopt a high minimum corporate tax.” He adds that this decision “could have a transformative role” and encourages other European countries to follow the same path, paving the way for an agreement on a higher lower rate first in the European Union and then around the world. “Contrary to public opinion, an effective minimum tax does not require a global agreement. There are countries that have an interest in implementing low rates and reject an international agreement. But this does not constitute an obstacle for other countries, unilaterally, to increase the effective tax rate on corporate profits.” He concludes: “The cycle of international tax competition can be stopped even if tax havens do not increase their taxes, and the European Union can be the global leader in this process.”
ACS will pay 354% more with a minimum of 25%
The report also calculates the impact that the type of bottom line could have on certain companies – those that break down country data by country -: their tax bill would rise between 30% and 50% with a minimum of 25%. Banks must, on average, pay 44.5% more taxes; Other companies 22%. There are exceptions. ACS Construction should pay 354% more; Bankia will not have to pay one euro more. Conversely, Santander will see its tax bill increase 21%, British HSBC by 247%, Telefónica by 70% and Iberdrola by 60%.