IMF harmonization Europe corporate tax call criticizes that multinationals have reduced their tax burden despite increased profits - The diversion of profits from multinationals to jurisdictions with a lower tax burden could be numbered, according to the latest proposals from major international organizations regarding corporate tax reform and transnational taxation that have recently been revealed.

As well, the G7, which groups the U.S., Japan, Germany, France, Canada, United Kingdom, and Italy, could approve this Friday their final agreement on the taxation of corporate multinationals, that will be focused precisely on ensuring that taxed for the income that they get in each country, while the Organization for Economic Cooperation and Development (OECD) still negotiating a global compact on corporate taxes.

These initiatives have gained support after US President Joe Biden defended this tax agreement in the OECD to harmonize corporate taxes and proposed raising the minimum rate for companies operating outside his country. For its part, the International Monetary Fund (IMF), which has supported the OECD proposal, has defended in a recent study the need to harmonize corporate tax in the face of the collapse in revenue collection over the past 25 years.

The report, entitled Taxation of multinationals in Europe, points out that the corporate tax rate has been reduced from 35% in 1995 to 21% in 2019, despite the fact that the IMF finds that corporate profits have averaged 3% of GDP in this period. "Empirical evidence suggests that the profits of multinationals have a lower tax burden than those of their domestic counterparts," the study notes, criticizing tax avoidance practices.

IMF harmonization Europe corporate tax call criticizes

For the IMF, this phenomenon is due to the transfer of benefits from jurisdictions with higher taxes to others with less charges, explaining that it is due to the business models of multinational enterprises and the expansion of commerce and digital cross-border, which considered that has increased competition between European countries for reducing their tax burden and, in consequence, has plummeted the collection of the tax.

In fact, the report points out that the average type of companies in Europe is already below the OECD average, so it advocates greater coordination on corporate taxes within the European Union to curb tax competition between EU partners and the transfer of profits to more benevolent jurisdictions with the profits of multinationals and reduce pressures on FDI recipient countries to further reduce their tax burden.

IMF harmonization Europe corporate tax call criticizes

"Domestic companies are at a competitive disadvantage and citizens perceive the current corporate tax system as unfair," notes the IMF, which warns that the constant reduction in the type of companies implies a race to the abyss in terms of corporate taxation in Europe, the consequences of which are said to be aggravated by the transfer of profits to other jurisdictions.

For this reason, the report argues that the best solution to this problem involves a global agreement to limit tax competition, define the taxation of the digital economy and the implementation of measures to prevent tax avoidance of the benefits business, which has generated losses of between 2% and 24% in the collection of corporate taxes in Spain, according to several estimates that covers the study of the IMF.

IMF harmonization Europe corporate tax call criticizes

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The Government withdraws its proposal of 13 tranches of contribution for real income for self-employed to approve the extension of the ERTE this Thursday

Despite the differences in their content, for the next 2 agreements of the social dialogue, the Government has slope of reach with trade unions and employers, the fifth extension of the temporary layoff of employment (ERTE) and providing extraordinary termination of activity for the self-employed and pension reform, are moving forward together in the most complex of both negotiations.

Thus, the Government had been expected to approve Tuesday in the Council of Ministers for the extension of the FATE and the provision of self-employed until the 30th of September, but the agreement was not possible before the refusal of the employer and the unions to modify the regime of exemptions in the contributions to Social Security to workers in ERTE, the minister of Inclusion and Social Security, José Luis Escrivá, has been proposed to reduce, depending on The Country.

Escrivá proposed on Monday to maintain exemptions for ERTE by impediment between 90% and 100% and reduce the limitation and for protected sectors by 10% in July, 20% in August and 30% in September. The CEOE board unanimously rejected the proposal, UGT deputy secretary general Cristina Antoñanzas called it unacceptable, and CCOO secretary general Unai Sordo joined the criticism, but pointed out that the ERTE were not in danger, according to the Prisa Group newspaper.

Despite these disagreements persist, the Government has announced extraordinary Council of Ministers on Thursday to approve the extension of ERTE with or without the agreement of the social dialogue, according to Cadena SER, which has revealed that the third vice-chairman, Yolanda Díaz, had already agreed to the extension with employers and unions last week, but Escrivá disrupted the agreement with your proposal from last time, which was not submitted to negotiate with the social partners.

So far, the 8 agreements of the social dialogue that have been reached over the 17 months since the beginning of the XIV Legislature have been agreed with employers and unions, something not necessarily usual in previous decades. Therefore, to avoid approving the new extension without the consensus of the social partners, the Ministry of Inclusion and Social Security has offered changes in its proposals on pension reform that facilitate agreement on ERTE, according to El País.

In this way, José Luis Escrivá would have tried to re-build bridges with the social agents offering the withdrawal of its proposal further discussion on pensions, which involves setting up 13 flights of quote in real incomes for the self-employed, which had received widespread criticism from trade unions, employers ' associations and self-employed because it implied odds of between 90 and 1200 euros from 2031 according to the income of self-employed workers.

If this proposal convinces unions and employers, the Government would again get a new agreement from the dialogue when the deadline for this is about to run out, given that the ERTE regime and the extraordinary benefits for self-employed expires on May 31, in just 5 days. However, the complicated negotiation of this extension could serve to facilitate the tenth agreement of the social dialogue of the legislature, with the expected pension reform.