The OECD’s chief executive is confident of a global agreement on the taxation of multinationals
The OECD Secretary-General has expressed optimism that multinationals can reach a global agreement on taxation to ensure that countries will pay more taxes to U.S. technology companies to “increase the number of different unilateral measures”.
In an interview with the Financial Times, Mathias Cormann he added that the same internationalist principle should make the EU think twice before punishing countries with a different view of global warming before setting unilateral tariffs.
Failure in both areas, the former Australian finance minister said, would hurt growth and the recovery from the coronavirus crisis.
When Cormann took over Angel Gurría as secretary general of the international organization in June, he will be the most important element of his tray global negotiations on the taxation of multinationals.
The inability to reach an agreement has created what OECD officials call the “Wild West” with countries establishing their digital taxes which have nothing to do with international norms and which threaten to spark trade wars with the US.
“It is in the interest of the major companies involved to be able to deal with a coherent set of international rules, rather than face the proliferation of different unilateral measures,” Cormann told FT.
“I’m calmly optimistic because in the end, sense and sensitivity will prevail.”
The Biden administration has cooled transatlantic tensions this month, falling Washington’s insistence that U.S. companies participate in the global participatory tax framework is voluntary. The move has given a boost to talks, but does not guarantee success, mainly because the deal must ensure a majority in both houses of the U.S. Congress.
Cormann, however, was confident that an agreement could be quickly secured so that governments could receive more taxes from multinational corporations. The OECD’s proposals would generate more revenue for the U.S., as Washington would provide some ability to tax foreign multinationals, including large European luxury goods companies.
Without compromising on the OECD-led negotiations, it would probably open up different unilateral tax measures, greater disparities and a slower recovery from the pandemic, Cormann warned.
Michael Devereux, a professor of business tax at Oxford University, said the OECD agreement would “let the genius get out of the bottle” and be the start of wider reforms. This would prevent the “collapse” of the international tax system[ing] under the complexity of its tax rates and the weight of competition, ”he said.
Cormann will have the backing of the EU to push for a tax deal, but to criticize European plans carbon limit tax it will be so welcome about imports, reinforcing opinions that it is not serious about tackling climate change.
“At a time when we want to maximize the strength of the post-Covid recovery, the reintroduction of new trade tariffs would have implications for trade and the global economy,” he said.
“It would be much better for each jurisdiction to have the right burden to help achieve a global zero of zero without having to introduce new trade tariffs.”
Brussels will present in June detailed plans for a carbon limit adjustment mechanism designed to increase the cost of imports from non-EU countries that have not met Paris’s climate targets or committed to zero zero emissions.
The European Commission’s proposals are being closely watched by the bloc’s trade allies.
US Special Commissioner for Climate Affairs John Kerry has expressed concern that the EU should move forward with the border tax, and warned that this should be the case. “Last resort” in the global struggle to lower emissions.
Within the EU, France is one of the biggest champions of a border tax, but there is concern among small member states that it could lead to trade retaliation.
Cormann told the FT that nations need to pursue different approaches to meeting their emission reduction targets that take into account their specific circumstances, and warned governments to adopt prudent ways to unilaterally punish states that adopted different methods of tackling climate change.
Carbon limit taxes, Which the EU is looking at for companies that do not pay for emissions generated in their domestic markets, said it risks hurting global growth.
In 2014 Australia became the first developed country to repeal its national carbon tax, a policy Cormann described at the time as “an act of economic harm to itself”. Unlike many of its trading partners, Canberra has not committed to achieving zero net emissions by 2050.
“The Australian government’s record is much better than some critics believe. It has met and exceeded international emission reduction targets so far,” Cormann said, denying denials he said he was “climate skeptical”.
“I will do everything I can to get the best possible results and reach a global zero by 2050,” he said.
Cormann, a 50-year-old Conservative politician, narrowly beat former EU trade commissioner Cecilia Malmstrom last week in a competition for OECD secretary-general. He he overcame fierce opposition on the part of unions and environmental groups.
He said much of his visit to the Member States was of European origin – Cormann was born in Belgium before moving to Australia in 1996 and speaks several languages - and the OECD’s ability to strengthen its vision in the Asia-Pacific region.
“Europe’s best interest is to focus the OECD on the Asia-Pacific,” Cormann said. “In terms of economic growth in the near future, it is a very important part of the world, but it is clear that many strategic, economic and trade policy issues also apply here.”
Additional report by Jim Brunsden in Brussels
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