Some of the world’s richest nations are within touching distance of a historic deal to close the net on large companies which do not pay their fair share of tax, France and Germany said on Friday after a day of talks in London.
Finance ministers from the Group of Seven rich nations are meeting in person for the first time since the start of the COVID pandemic, after U.S. President Joe Biden‘s administration gave fresh impetus to stalled global tax talks this year.
Rich nations have struggled for years to agree a way to raise more tax from large multinationals such as Google, Amazon and Facebook, which often book profits in jurisdictions where they pay little or no tax.
“We are just one millimetre away from a historic agreement,” French Finance Minister Bruno Le Maire told the BBC.
German Finance Minister Olaf Scholz said he was “absolutely confident” that there would be an agreement by the time the meeting finishes on Saturday.
“We will have an agreement which will really change the world,” he told the BBC.
A deal could raise tens of billions of dollars for governments at a time when coffers are empty after the coronavirus pandemic.
But major disagreements do remain on both the minimum rate at which companies should be taxed, and on how the rules will be drawn up to ensure that very large companies with lower profit margins, such as Amazon, face higher taxes.
The United States has proposed a minimum global corporation tax rate of 15%, above the level in countries such as Ireland but below the lowest level in the G7.
Le Maire said this represented “only a starting point”.
“We need something that is credible,” he added. “We are still working on this very tricky point of the rate.”
Britain said talks on tax policy had been productive but differences remained. Discussions will continue over dinner.
Due to COVID restrictions, ministerial delegations have been cut down. Seating plans at the ornate 19th century mansion Lancaster House have been redesigned with the help of health officials, and British finance minister Rishi Sunak greeted leaders by bumping elbows, not shaking hands
Sunak – who has stressed the importance of face-to-face meetings for reaching agreement – told ministers earlier that the rest of the world was watching for progress.
“We cannot continue to rely on a tax system that was largely designed in the 1920s,” he said.
Le Maire said a deal would send an important signal that the G7 – the United States, Japan, Germany, Britain, France, Italy and Canada – could still be influential.
Any deal would still need much wider global buy-in, at a meeting of the G20 in Venice in July.
“It’s going to go right to the wire,” one source close to the talks said. “The United States are holding to their position, as are we.”
Japan’s finance minister Taro Aso said on Monday that he did not expect agreement this week on a specific minimum tax rate.
The U.S. Treasury expects a fuller agreement when Biden and other heads of government meet in England on June 11-13.
Biden had been planning to raise the U.S. domestic corporate tax headline rate to as high as 28%. But on Thursday he offered to keep the rate unchanged at 21% but proposed a 15% tax floor after deductions and credits in a bid to gain support from Republicans for new spending measures.
But just as important for Britain and many other countries is that large multinationals pay more tax where they make their sales – not just where they book profits, or locate their headquarters.
“Their business model gives them chances to avoid taxes … much more than other companies,” Scholz said.
The United States wants an end to the digital services taxes which Britain, France and Italy have levied, and which it views as unfairly targeting U.S. tech giants for tax practices that European companies also use.
British, Italian and Spanish fashion, cosmetics and luxury goods exports to the United States will be among those facing new 25% tariffs later this year if there is no compromise.
The U.S. has proposed levying the new global minimum tax only on the world’s 100 largest and most profitable companies.
Britain, Germany and France are open to this approach but want to ensure companies such as Amazon – which has lower profit margins than other tech firms – do not escape the net.
(Additional reporting by William James and Leigh Thomas; Editing by Chizu Nomiyama, Mike Harrison and Giles Elgood)
Toronto Stock Exchange hits record high on energy boost
* The energy sector climbed 1% tracking crude prices, which were buoyed by expectations that demand will recover rapidly in the second half of 2021. [O/R]
* The Fed kicks off its two-day meeting on Tuesday, and officials are faced with ongoing tension between their two main goals, as inflation rises faster than expected even with millions of Americans still unemployed.
* At 9:38 a.m. ET (1338 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 77.55 points, or 0.38%, at 20,235.2, an all-time high.
* Producer prices in Canada most likely rose 3.1% in May from April, pushed higher mainly by softwood lumber, Statistics Canada said in a preliminary flash estimate.
* The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.4%.
* On the TSX, 163 issues were higher, while 61 issues declined for a 2.67-to-1 ratio favoring gainers, with 17.47 million shares traded.
* The largest percentage gainer on the TSX was BRP Inc, which jumped 4.6%, after the insurance distribution company issued a $350 million worth substantial issuer bid.
* Its gains were followed by Aritzia Inc, which rose 4.5%, after the apparel retailer acquired 75% of the athletic apparel maker Reigning Champ in deal worth $63 million
* Miners First Quantum Minerals Ltd and Hudbay Minerals Inc, fell the most on the TSX, down 4.1% and 3%, respectively.
* The most heavily traded shares by volume were Canadian Natural Resources Limited, BCE Inc and Auxly Cannabis Group Inc.
* The TSX posted 18 new 52-week highs and no new low.
* Across all Canadian issues there were 102 new 52-week highs and five new lows, with total volume of 32.21 million shares.
(Reporting by Amal S in Bengaluru; Editing by Amy Caren Daniel)
Canadian dollar hits 7-week low
The Canadian dollar weakened against its U.S. counterpart on Tuesday as investors weighed prospects of the Federal Reserve turning less dovish, with the commodity-linked currency extending its pullback from a recent six-year high.
The loonie was trading 0.4% lower at 1.2192 to the greenback, or 82.02 U.S. cents, after earlier touching its weakest level since May 6 at 1.2204. Earlier this month, it touched its strongest in six years at 1.2007.
“We’ve had such a strong move with commodity currencies and that trade has been slowly getting unwound,” said Edward Moya, a senior market analyst at OANDA in New York.
“We are starting to see a little bit more of an expectation that you are going to have a slightly less dovish Fed tomorrow and the commodity trade could continue to get undone a little bit,” Moya added.
In a new policy statement and economic projections due on Wednesday, the Fed is expected to acknowledge the first conversations among its policymakers about when and how fast to pare back the massive bond-buying program launched last year.
The program has supported global economic recovery, boosting commodity prices. Canada is a major producer of commodities, including copper and oil.
Copper fell 4%, extending its pullback from a record high in May. Oil settled 1.8% higher at $72.12 a barrel.
Canadian housing data for May was mixed. Housing starts climbed 3.2% compared with the previous month, while home sales were down for a second month after a blazing start to the year.
Canadian consumer price data is due on Wednesday, which could offer clues on the Bank of Canada policy outlook.
The Canadian 10-year yield was little changed at 1.389%. On Monday, it touched its lowest intraday level in more than three months at 1.365%.
(Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney)
G7 nations to boost climate finance
G7 leaders agreed on Sunday to raise their contributions to meet an overdue spending pledge of $100 billion a year by rich countries to help poorer countries cut carbon emissions and cope with global warming, but only two nations offered firm promises of more cash.
Alongside plans billed as helping speed infrastructure funding in developing countries and a shift to renewable and sustainable technology, the world’s seven largest advanced economies again pledged to meet the climate finance target.
But climate groups said the promise made in the summit’s final communique lacked detail and the developed nations should be more ambitious in their financial commitments.
In the communique, the seven nations – the United States, Britain, Canada, France, Germany, Italy and Japan – reaffirmed their commitment to “jointly mobilise $100 billion per year from public and private sources, through to 2025”.
“Towards this end, we commit to each increase and improve our overall international public climate finance contributions for this period and call on other developed countries to join and enhance their contributions to this effort.”
After the summit concluded, Canada said it would double its climate finance pledge to C$5.3 billion ($4.4 billion) over the next five years and Germany would increase its by 2 billion to 6 billion euros ($7.26 billion) a year by 2025 at the latest.
There was a clear push by leaders at the summit in southwest England to try to counter China’s increasing influence in the world, particularly among developing nations. The leaders signalled their desire to build a rival to Beijing’s multi-trillion-dollar Belt and Road initiative but the details were few and far between.
Johnson, host of the gathering in Carbis Bay, told a news conference that developed nations had to move further, faster.
“G7 countries account for 20% of global carbon emissions, and we were clear this weekend that action has to start with us,” he said as the summit concluded.
“And while it’s fantastic that every one of the G7 countries has pledged to wipe out our contributions to climate change, we need to make sure we’re achieving that as fast as we can and helping developing countries at the same time.”
Some green groups were unimpressed with the climate pledges.
Catherine Pettengell, director at Climate Action Network, an umbrella group for advocacy organisations, said the G7 had failed to rise to the challenge of agreeing on concrete commitments on climate finance.
“We had hoped that the leaders of the world’s richest nations would come away from this week having put their money their mouth is,” she said.
Developed countries agreed at the United Nations in 2009 to together contribute $100 billion each year by 2020 in climate finance to poorer countries, many of whom are grappling with rising seas, storms and droughts made worse by climate change.
That target was not met, derailed in part by the coronavirus pandemic that also forced Britain to postpone the U.N. Climate Change Conference (COP26) until later this year.
The G7 also said 2021 should be a “turning point for our planet” and to accelerate efforts to cut greenhouse gas emissions and keep the 1.5 Celsius global warming threshold within reach.
European Commission President Ursula von der Leyen said the G7 leaders had agreed to phase out coal.
The communique seemed less clear, saying: “We have committed to rapidly scale-up technologies and policies that further accelerate the transition away from unabated coal capacity, consistent with our 2030 NDCs and net zero commitment.”
The also pledged to work together to tackle so-called carbon leakage – the risk that tough climate policies could cause companies to relocate to regions where they can continue to pollute cheaply.
But there were few details on how they would manage to cut emissions, with an absence of specific measures on everything from the phasing out of coal to moving to electric vehicles.
Pettengell said it was encouraging that leaders were recognising the importance of climate change but their words had to be backed up by specific action on cutting subsidies for fossil fuel development and ending investment in projects such as new oil and gas fields, as well as on climate finance.
British environmentalist David Attenborough appealed to politicians to take action.
“We know in detail what is happening to our planet, and we know many of the things we need to do during this decade,” he said in a recorded video address to the meeting.
“Tackling climate change is now as much a political and communications challenge as it is a scientific or technological one. We have the skills to address it in time, all we need is the global will to do so.”
($1 = 1.2153 Canadian dollars)
(Reporting by Elizabeth PiperAdditional reporting by William James and Kate Abnett in Brussels and Andreas Rinke in BerlinEditing by William Maclean, Raissa Kasolowsky and Frances Kerry)
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