The G7’s weekend agreement on a global minimum corporate tax rate of at least 15 per cent has been hailed as historic, but is still dependent on the successful outcome of wider negotiations aimed in part at bringing Big Tech to heel on paying its fair share.
The first hurdle will be winning the backing of the G20 group of nations, meeting in Venice next month. That would, in turn, influence the talks being conducted among 139 countries at the OECD in Paris.
But US Treasury secretary Janet Yellen focused on the second pillar: the global minimum rate of at least 15 per cent. This would generate more revenue for the federal government in Washington. The first pillar requires a global agreement and US legislation which must pass through Congress, while the second — which the OECD estimates will raise the most additional revenues — can be implemented unilaterally, but would work better if many countries came on board.
Pillar one faces vigorous opposition in Washington. France, Italy and the UK refuse to abolish their own digital taxes until the US has passed the relevant legislation. The FT’s editorial board says the accord overturns a century of tax practice, where profits are taxed only where companies have a physical presence. However, Lex says extra revenues may be less than 4 per cent or $84bn, with the biggest share being paid by tech giants and other US multinationals to the US.
President Biden will attend the main G7 summit in Cornwall on Friday, before heading to Brussels for EU-US summits next week. Today’s Europe Express newsletter says there is one likely “deliverable” that will come out of the EU meeting: the creation of a Trade and Technology Council to help shape standards and regulations in emerging sectors such as artificial intelligence.
Today’s Big Read says the council would also boost co-ordination on 5G, semiconductors, supply chains and export controls as the US urges Europe to sign up to its plan to counter China. Big Tech may be a tax target, but tech companies in general are being weaponised by governments in this century’s struggle for economic supremacy.
The Internet of (Five) Things
1. Chip shortages to last into 2022 – Flex The global chip shortage will last for at least another year, one of the world’s largest electronics contract manufacturers has warned. The forecast from Flex is one of the gloomiest yet for a crisis that is forcing car and consumer electronics groups to re-examine their global supply chains.
2. Uber bounces back in Europe – Uber’s ride-hailing business returned to pre-pandemic levels in the UK in mid-May, as the easing of lockdown restrictions spurred users to get back on the road faster than the company expected. Across Europe, Uber’s total gross bookings recovered to more than 80 per cent of the level reported in the same period in 2019. This week’s How to Lead interviews Markus Villig, who started Bolt, the Tallinn based ride-hailing company in 2013 when he was 19.
3. France fines Google €220m – French competition regulators have fined Google €220m for abusing its dominant position in the online advertising market and imposed changes to how it operates in the country for three years. The case could provide a blueprint for other ongoing lawsuits against Google in Brussels, the UK and US.
4. SoftBank-backed Katerra goes bust – Katerra, the US construction start-up backed by SoftBank’s Vision Fund, filed for bankruptcy with more than $1bn in liabilities, becoming, after Greensill, the second leading company in the Japanese conglomerate’s portfolio to collapse this year
5. Apple pressed to close privacy loopholes – Apple has come under pressure to tighten its new privacy rules ahead of its annual developers’ conference today, with experts warning that thousands of apps were continuing to collect data from users who had opted out of tracking. The new rules, which came into effect in April as part of the iPhone’s iOS 14.5 software update, force apps to get consent from users to track their behaviour in order to target them with advertising.