Historic global minimum corporate tax deal controversial Google tax enforcement in the air - The Google tax, officially known as a Tax on Certain Digital Services, can be counted even before it is executed.

Last Tuesday, after several extensions, the Council of Ministers was expected to approve the implementation of this tax, in addition to finally specifying its regulations, to clarify the many doubts it had generated in all the companies affected.

Without any explanation, none of that happened. Weeks earlier, the government had received angry pressure, especially from the footwear industry, not to implement this tax. Was the footwear industry affected by the Google tax? Not directly, but the u.s. Government, after several warnings, had approved the imposition of tariffs of 25% on certain (it seems that this term is a common place in this issue) Spanish products if finally Spain implemented this tax unilaterally, affecting, among others, to american companies like Google, Facebook or Amazon.

Historic global minimum corporate tax deal controversial Google

To do this, Biden announced the imposition of the tariffs, but put them on hold for 180 days. It now seems clear that these movements already contemplated the possibility of an imminent global agreement on taxation.

The pressures from the footwear industry were not the only ones, although they were the only ones to which the Spanish Government paid attention. Before, associations of digital companies, such as Adigital (to which Apple, Google or Facebook belong) or Ametic and even the CEOE had already insisted time and again on the risks of applying this tax unilaterally.

Historic global minimum corporate tax deal controversial Google

And, more modestly, companies such as Axel Springer, Auto Bild, Computer Today and Hobby Consoles, had also expressed their discontent about, since due to the arbitrary and in no time detailed conditions to be taxed by this tax -more than 3 million local billing and more than 750 million at the global level - where also was included, as are other companies (like some advertising agencies) despite of strictly comply with taxation in Spain on the basis of their actual benefits.

A “collateral damage” that the Government knew, and that, according to sources in the Ministry of Economy, it was necessary to reach a revenue of close to 1,000 million euros per year, which, together with the revenue arising from the implementation of other new taxes -as tax to the aviation and maritime transport, the Tobin tax, or tax on plastic containers are not recycled, would allow the Government to comply with the requirements of Brussels for the approval of their budgets.

Historic global minimum corporate tax deal controversial Google: In other words, what at first was going to be a way for the big tech are taxed in our country on the basis of your actual billing, by taxing income rather than the benefits (which are semi tax havens such as Ireland), ended up being a mere tool collection, as demonstrated in the own end conditions: while in France the tax itself was the basis of local revenue € 25 million, in Spain was reduced to 3 million -despite the fact that the minister Nadia Calviño had promised that it would be similar-, a way to” put in the bag " many more companies and therefore increase revenue.

An arbitrariness that causes some companies in the same sector, such as the media, with the same digital business model and a similar turnover in Spain are affected by this tax, and others not, for the simple fact of entering or not in that unexplained range of 3 million local and 750 million global.

Historic global minimum corporate tax deal controversial Google: For more inri, Google and Amazon lacked time to increase all their services with between 2 and 3% to compensate for the arrival of this tax. The immense power and the great dependence that many companies have on these two giants made any protest absurd: either you take it or you leave it.

And there's more. The Tax on Certain Digital Services is so ambiguous and confusing in its explanation and what needs to be included as such, that for many companies it is impossible to determine its processing without resorting to a consultant, as has been the case of Axel Springer España, which also has many contracted services, as almost all of the media in Spain, with Google.

This means that, in the event that this tax is finally executed, Axel Springer Spain will have to pay three times: the tax itself, the Google surcharge and the cost of tax advice.

All this while the Government of Spain is promoting the digital transformation of the country and companies, something that seems contradictory if companies are criminalized for their digital business, as is the case of the media, which are already very advanced in digitalization, forced by the fall of the printed business.

This weekend's historic agreement, which will have to be approved and ratified in July by the G-20 in Venice, may finally ensure that this tax is never implemented, ridding the government of a mess of unpredictable consequences.

Even so, the last word is not yet said, and this week we will probably know the final decision of the Government on this controversial issue.

Historic global minimum corporate tax deal controversial Google

More news:

Wealthier countries agree on a minimum corporate tax rate of 15%: what it means for Spain and what the next steps will be

The finance ministers of the G7 countries met in London to discuss and bring together positions to establish a minimum corporate tax rate, something that has finally happened, as a firm agreement has been reached. Although that does not imply its creation directly.

After hours of negotiation, the representatives of the countries have agreed to work to establish a minimum rate of 15% on corporate tax, a decision that would affect technology giants such as Apple and Google, and that would have an enormous collection capacity, which would give governments a respite to face the debts contracted by the coronavirus crisis.

However, this decision by the leaders of the G7 is not binding or has any legal implication, but it will be a pressure when this proposal is taken to the G20 summit in July.

That is the moment when agreements could be reached between all the countries that are in favour of this measure, which would be able to tax multinational companies that operate in many countries, but that tax in which more tax benefits —within the legality— offer them, something that is increasingly common.

Agreeing to create this global tax rate would avoid a race between countries to be more tax-attractive, but in addition, this rule would also aim at companies paying taxes in each country where their products and services are sold.

In Spain, according to 2017 reports from the Ministry of Finance, there were companies that paid 1.5% of taxes in relation to their profits within the national territory, in contrast to the 15% now proposed, which would give a great boost to collection, and that would avoid the effectiveness that some tax engineering techniques have right now, which allow large companies to pay, in a totally legal way, less taxes in some countries.

Specifically, Spain would raise 700 million euros more each year if it were established at 15%, a figure that would rise to 12,400 million euros if it were established at 25% proposed by the United States.

It is possible, however, that some companies could avoid being subjected to this minimum rate, since, if it does not reach a certain profit margin, the rate could be lower. This is the case for Amazon, which, by reinvesting a large part of its profits in the company, has a profit margin much lower than that of other companies. To give you the idea, Facebook has a profit of 45%, while Jeff Bezos ' company stands at about 5.5%.

The minimum rate would also affect Spanish companies such as ACS, which, being the largest affected by the rise, would pay 200% more taxes if the minimum rate established today is agreed.

According to the bulletin, other companies such as Telefónica-an increase of 31.7% - or Iberdrola— an increase of 20.7% - would also be affected, and would have to pay more taxes than they currently pay, something that would benefit the public coffers. These companies have earned, respectively, 886 million euros and 1,025. 2 million euros in the first quarter of this 2021.

For the time being, the G7 nations have agreed to work together to create this minimum corporate tax rate, but for this to happen, it must first go through the G20. But undoubtedly, the fact that 7 of the most powerful countries have reached this agreement, is a sign that it may be feasible.