PARIS- France urged the United States on Tuesday to drop reservations towards an OECD reform of decades-old international tax rules and proposed setting a minimum corporate tax rate of 12.5%.
The Organisation for Economic Cooperation and Development is in the middle of the biggest rewrite of international tax rules dating from the 1920s.
Many governments consider the existing rules to be woefully ill-adapted for the digital age, allowing big internet giants to book revenues in low-tax countries like Ireland regardless where the paying customer is.
The overhaul would in particular define how much business a company must do in a country to be taxable there and determine how much profit can be taxed there.
Speaking at a tax conference at the Paris-based OECD, French Finance Minister Bruno Le Maire said France supported the international policy forum’s latest proposals and said the United States should too.
“There were worries, we consider that you have addressed all of the Americans’ worries on the first pillar and there is no longer any reason for everybody not to support the OECD proposal,” Le Maire said.
While the first pillar of the reform would overhaul governments’ rights to tax companies on their territory, a second pillar aims to build an international framework for minimum corporate tax.
Though broadly supportive of updating the tax rules, Washington has in the past had concerns that it would focus largely on its internet giants. Since an OECD proposal in October had a broader scope covering consumer facing companies, the United States now has concerns about the impact on more traditional firms as well, some officials say.
The OECD has yet to propose a rate, but Le Maire said that it should be set at 12.5%, which also happens to be Ireland’s corporate tax rate.
“To us 12.5% seems to be a good starting point and reference point for a minimum corporate tax rate,” Le Maire said.
The average statutory corporate tax rate across OECD countries is 23.7%, but the effective rates companies pay is often much lower due to deductions, exemptions and credits.
(Content and photos syndicated via Reuters)