On June 5, G7 ministers announced their intention to apply a minimum tax of 15 percent on the profits of multinationals relocated to tax havens. Let’s face it: if the proposal is all here, it is limited to officially granting the richest permission to commit fraud. Small and medium-sized enterprises, as well as the popular and middle classes, have no way of setting up branches to shift their profits or income to countries with affordable taxation. These taxpayers have no choice but to pay normal taxes. But if social contributions are added to the income and profits tax, employees and small and medium-sized self-employed workers in the G7 countries find themselves paying rates much higher than 15 percent: at least 20-30 percent , and often even 40-50 percent.
The announcement of the G7 also couldn’t have come at a more wrong time. Investigative journalism site ProPublica just released an investigation confirming what researchers had already shown: US billionaires pay almost no income taxes compared to the rest of the population. In practice, the profit tax is often the final tax paid by the richest (when they pay it). Profits accumulate in companies or ad hoc structures (trusts, holding companies), which finance a large part of the standard of living of these people (private jets, credit cards, and so on) with almost no control. Recognizing that multinationals will be able to continue shifting their profits to tax havens in exchange for a single 15 percent tax, the G7 formalizes the advent of a world where oligarchs structurally pay less taxes than the rest of the population.
New rules
How to get out of this situation? First of all, by setting a minimum tax higher than 15 percent, which any country can do right away. As the European Tax Observatory has shown, France could levy a minimum tax of 25 percent on multinationals, which would earn it 26 billion euros a year, the equivalent of almost 10 percent of national healthcare costs. With a tax of 15 per cent, just higher than that applied by Ireland (12.5 per cent), the measure would be less effective and would only yield 4 billion. A part of the 26 billion could be used to finance hospitals, schools, the energy transition; another to reduce the tax burden on self-employed and less wealthy employees.
It is illusory to expect European unanimity on such a decision. Only unilateral action, ideally with the support of some country, can unblock the situation. Ireland or Luxembourg will probably appeal to the Court of Justice of the European Union (Cgue), relying on the fact that the principles of free movement of capital (without any tax, social or environmental compensation) defined thirty years ago do not provide such a possibility. It is difficult to say what the court will decide, but if necessary the rules will have to be rewritten.
In theory, in recent years, rich countries should have created systems for the automatic transmission of international banking information on the ownership of capital and on individual financial incomes. So why not publish reliable indicators that can measure the progress made? The G7 countries should disclose detailed information each year on the taxes paid by the richest people (assets between one and ten million euros, between ten and one hundred million, between one hundred and one billion, and so on).
The ProPublica investigation revealed that the rich do not pay much, and that only a progressive tax on wealth would allow these people to be taxed significantly in relation to their wealth. In any case, instead of waiting for the next revelations, all governments should make public the amount of taxes paid by their billionaires and millionaires, particularly in France.
Finally, this discussion must open up to developing countries. The mechanism provided by the G7, according to which each country is charged with charging a minimum tax to its multinationals, is only acceptable within a general system of redistribution of profits. The G7 evokes the possibility that part of the profits that exceed a certain return threshold (more than 10 per cent of the invested capital per year) will be redistributed according to sales in the various countries. But this system will only affect very low sums and will mostly be limited to a redistribution among advanced economies. If the latter really want to take up the Chinese challenge, improve their image and give the global South a chance, poor countries need to have a significant share of the profits of all the multinationals and billionaires on the planet.
(Translation by Andrea De Ritis)
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