France’s Finance Minister Bruno Le Maire praised the deal as ambitious and said his country would continue to push for a higher tax rate.
“This agreement will allow the digital giants to be taxed and, for the first time, to introduce a minimum tax rate for companies to combat tax dumping,” said Le Maire on Saturday. “In the course of the talks, France will seek the highest possible minimum tax rate in order to end the race to the bottom in certain countries.”
There are huge sums of money at stake. A report from the EU Tax Observatory earlier this month estimates that a minimum tax of 15 percent would bring in an additional 48 billion euros, or $ 58 billion per year. The Biden administration forecast in its budget last month that the new global minimum tax system could help bring the United States $ 500 billion in tax revenue over a decade.
The deal signaled a return to Comity in the Club of Wealthy Countries, which was shattered in recent years when the Trump administration imposed tariffs on American allies but has regained a foothold since Mr Biden took office. Last year, then Treasury Secretary Steven Mnuchin broke off talks after negotiations on digital taxes stalled and President Donald J. Trump prepared retaliatory tariffs against countries that wanted to tax American tech companies.
Negotiations picked up speed again this year after Ms. Yellen made new proposals to successfully break the deadlock. She proposed a global minimum tax rate of at least 15 percent and suggested replacing European taxes on digital services with a new levy on the 100 largest companies in the world based on where a company sells its goods or services, independently whether there is also a physical presence in these countries.
Mr Le Maire said Mrs Yellen’s commitment was vital.
“Let’s be clear, we have someone who is easy to discuss, easy to compromise with, and easy to bridge some gaps between different nations,” he said.
Despite the breakthrough, such a far-reaching deal will not be easy to conclude, and the risk of trade war remains if countries keep their taxes on digital services. The Biden government said this month that it is ready to impose tariffs on approximately $ 2.1 billion worth of goods from Austria, the UK, India, Italy, Spain and Turkey in retaliation for its digital taxes. However, it keeps them on hold as the tax negotiations evolve.
