European Socialists welcome plans for global tax rate

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The Party of European Socialists strongly welcomes the decision by G20 finance ministers to back plans for a global corporate minimum tax rate. The plan was supported by finance ministers from the G20 – whose members account for more than 80% of world GDP and 75% of global trade – at a two-day meeting in Venice, Italy, last week.

PES President Sergei Stanishev said: “When companies globalise profit, the answer is to globalise tax. That is how we make sure globalisation is fairer for our communities. The impact of this deal will be seismic. By finding unprecedented agreement among the world’s largest economies, we can move the needle firmly towards global tax justice.“ European socialists and social democrats have been pushing for this for many years. German Vice Chancellor Olaf Scholz, European Commissioner Paolo Gentiloni and other progressives have led the way. Without them, this historic deal would not be on the table.

“Whilst this proposal is global in its scope, its effects will be local. If agreed, the world’s wealthiest companies will no longer be able to negotiate minuscule tax rates that rob government of the revenue needed to run society. It will mean more money for our communities, better public services and a stronger recovery. We want to see G20 leaders give the green light to a strong deal in October, with a corporate tax rate of at least 15%.”

The two pillars of the global corporate minimum tax rate proposal ensure the international companies pay taxes in countries where they make profits, rather than in low-tax jurisdictions, and set a minimum level of corporate tax globally, so that tax competition between governments does not develop.

Earlier this month, the PES Financial and Economy Network called for progress on international taxation to solidify into an international tax deal. Last month on the eve of the PES conference With Courage. For Europe. in Berlin, the PES Presidency adopted a declaration – Fair global tax rules – setting out the progressive political family’s shared vision for a fair international tax system.

The PES has long advocated for reform of global taxation rules, which are clearly outdated. The coronavirus pandemic has only increased the urgency of these reforms, which are needed so governments worldwide can collect revenues to fund health systems and to repair the social and economic inequalities which the COVID-19 crisis has exacerbated.

Murky waters for Malta

Malta has supported the move at OECD level, surprising a number of political analysts, given that both Government and the Opposition had re-iterated during the past months their insistence that tax matters should remain a matter of national policy.

In 2017 the OECD evaluated Malta’s tax regime and approved Malta as a tax compliant jurisdiction.  However, last year, the OECD had downgraded Malta on its tax transparency, deeming it only “partially compliant” with international standards. The downgrade was confirmed in the second round of the OECD’s Global Forum on Transparency and Information for Tax Purposes.

At the time, the Maltese Government countered that it “respectfully disagrees” with the downgrade, even though it agreed with many aspects of the review.

“Whilst Malta acknowledges that there is room for improvement on the practical aspects addressed in the report, Malta feels that not enough recognition has been given to (i) work carried out in addressing issues encountered; (ii) processes that are actually in place (particularly on banking supervision); (iii) the particular circumstances that Malta faced during the review period (particularly the sudden significant increase in requests in 2016); and (iv) the overall picture in relation to exchange of information in practice as corroborated by peer inputs including main exchange partners.”

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