Thread by @markscott82

ICYMI -- a deal to fundamentally overhaul the global tax system is expected to be announced tomorrow. It would rewrite domestic laws & international treaties, forcing the likes of @google & @facebook to pay more, globally, where they operate.

<<Cracks knucles>> cue thread

This comes down to who gets the right to tax the world's largest companies on their global operations: these firms' home jurisidictions, or countries that are home to these companies' actual customers.

In short, it's a question of sovereignty.

Friday's deal will be viewed as global. But, it really isn't. It's come down to a fight between the US (and its tech giants) and Europe (and its push to reclaim tax revenue from these companies)

The talks have been going on for years, at the @OECD, and tbh, credit for tomorrow's likely agreement, in many ways, should go to @PSaintAmans, the main leading these talks.

Want to know more about him? Sure, we got ya covered politico.eu/article/digita…

These negotiations almost fell apart in the waning days of the Trump administration after DC suggested the whole deal should be made voluntary.

That didn't go down well in Europe where many countries had already passed their own domestic digital taxes targeting the Valley

Fast forward to April this year and Biden's White House (shephered in many ways by @ItaiGrinberg) proposed a solution: let's make the whole tax overhaul solely focus on the world's 100 companies politico.eu/article/washin…

That was a gamechanger. It allowed DC to frame this as a tax overhaul that just didn't target the Valley. And it could allow Europe to claim victory, too, because the biggest tech companies would fall within the world's top 100 companies.

Job done, right?

Well, not quite. Even when the G7 (and later, G20) approved the Biden plan (I'll get to details in a minute), there was international and domestic problems. I could go into that in depth, but you know what, read this instead politico.eu/article/global…

A key question was: would Ireland, where many of the US tech giants are headquartered, overseas, because its low 12.5 corporate tax rate, come on board? Until very recently, Dublin was a no. But they've now caved, so it's all steam ahead.

The proposals fit into two buckets:

1) A global minimum tax rate of 15 percent to apply to the world's largest companies. That should, in theory, stop them from shopping for the lowest rate in a tax haven.

Ireland gets to keep its 12.5 percent rate, but will apply the 15 percent rate (via a 2.5 percentage point 'surcharge') to Big Tech giants.

I love me a good old tax fudge.

2) In an incredibly complicated tax formula, all countries where the world's top 100 companies have operations will given some of these firms' tax revenues, above a certain threshold.

That will apply to companies with at least a 10% margin (although Amazon still gets lumped in via its AWS cloud biz) and with at least $20 billion in revenue.

Again, it's the biggest of the biggest. It will generate billions in additional revenue for countries, collectively

And yet, even at this stage, it's not a done deal. We now come down to HOW to implement the thing. That won't be easy, with officials hoping to get the minimum tax rate done by 2022, and the tax-sharing done by 2023

Two main factors to look for:

1) Will the US sign up? @SecYellen has said part of deal can be done via straight Congressional majority, so they don't need Republicans' support. But the tax-sharing component will need some form of Senate approval. That could be challenging.

2) European countries will have to rescind their domestic digital taxes (DC wants that done, now). But many say they'll only do that when a final deal is in place, by 2023 at the earliest. In short, it's a big game of chicken on who will blink first politico.eu/article/a-deal…

Phew, hope that makes sense. Big HT to my Brussels colleague, @bsmithmey, who's been crushing this story before it was fashionable (if taxes can ever be fashionable.) If you don't follow him, you should. He's a great reporter.

Rant over. Thoughts appreciated.

PS: My view is that Washington and Silicon Valley "won" this fight. Why? Because DC was able to shift the burden away from solely digital giants & tech firms lobbied successfully to make that happen.

Back story on how that went down here w/ @birnbaum_e politico.eu/article/washin…

It’s official. Ireland backs @oecd deal, though claims victory in that smaller firms can keep using the 12.5 percent rate. Also: tax write-offs for multinationals👇

Amazed to see Ireland claiming victory after signing up to @oecd tax deal. It was made very clear to Dublin by Washington that if they didn’t sign up, the US would tax American companies,
domestically, to make up the difference to 15% minimum corporate tax rate if Ireland didn’t