G7 finance ministers confirm inability to finalize the global minimum tax agreement.


The upcoming G7 Finance Ministers' meeting in Italy has already publicly stated that the finalization of a global minimum tax rate agreement cannot be completed.

Italian Economy Minister Giancarlo Giorgetti stated ahead of Friday's G7 finance ministers meeting that the finalization of the global minimum tax agreement will not be completed as planned in June.

Representing Italy as this year's G7 rotating presidency, Giorgetti pointed out that the United States, India, and China all have reservations about the agreement's terms.

This tax primarily targets American digital giants, with the so-called "first pillar" aiming to reallocate tax rights for approximately $200 billion in corporate profits to the countries where the companies operate.

Giorgetti told reporters in Stresa, northern Italy, that the agreement will not gain approval from all countries planning to participate in the multilateral signing convention next month.

“This work will not be completed, and it is not a good thing,” the minister said.

Last week, Italy said it would push the final phase of negotiations to avoid the plan's failure.

The first pillar was initially expected to resolve the U.S. threat of retaliatory tariffs on European countries (such as Italy) that announce or adopt domestic digital taxes.

The U.S. trade department had threatened to impose 25% tariffs on over $2 billion worth of goods imported from Italy, Austria, the United Kingdom, France, Spain, and Turkey, ranging from cosmetics to handbags.

Italy hopes to negotiate an agreement with Washington to stop these tariffs, temporarily frozen until June, while retaining its taxation measures, an official told Reuters on Friday.

The government hopes to include other European countries in the negotiations with Washington, as Rome believes adopting a common position at the EU level would be more effective, the official added.

In 2019, Italy imposed a 3% digital transaction tax on digital companies with annual revenues of at least 750 million euros, of which at least 5.5 million euros are generated in Italy. Rome raised about 390 million euros ($422 million) through the tax in 2022.

While the first pillar is stalled, countries are implementing the second pillar of the global minimum tax rate agreement.

This part of the agreement aims to ensure that companies with annual revenues exceeding 750 million euros pay a global minimum tax rate of 15%, by allowing governments to levy supplementary taxes on income earned in low-tax countries.



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Deadweight Loss Of Taxation

The deadweight loss of taxation refers to the economic loss that occurs due to market inefficiencies and a decline in resource allocation efficiency during the implementation of taxes.

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