The G7 agreement on corporate minimum taxation does not appear to affect Cyprus, which plans to hold a constructive stance during discussions but at the same time secure its interests, Finance Minister Constantinos Petrides said on Monday.
G7 countries agreed on Saturday to back a minimum global corporate tax rate of at least 15 per cent in a bid to squeeze more money out of multinational companies such as Amazon and Google and reduce their incentive to shift profits to low-tax offshore havens.
Commenting on the issue, Petrides said the G7 decision did not appear to affect the island, as he stressed that “Cyprus is not a tax haven and effective taxation is in effect higher than 15 per cent.”
“Cyprus will be constructive during discussions at a European level, securing its interests at the same time,” the finance minister said.
“Small EU member states’ interests should be acknowledged and taken into consideration.”
Petrides had told European lawmakers last week that the island believed taxation was a matter of national competence.
Cyprus was last forced to review its corporate tax regime (CIT) in 2013 when it raised the threshold to 12.5 per cent from 10 per cent under terms of an international financial bailout.
However, the general secretary of the chamber of commerce and industry stressed that it was time Cyprus reformed its tax framework, as the G7 agreement was a sign of what would follow.
Marios Tsiakkis said on Monday it would be many months before countries came to an agreement, but it was time to discuss improvements to the framework and make it simpler.
Tsiakkis said the standard CIT rate in Cyprus was 12.5 per cent but unlike non-resident companies, Cypriot companies also paid special defence tax on dividends, interest and rental income.
The measures will need to find broader agreement at a meeting of the G20 – which includes several emerging economies – due to take place next month in Venice.
Current global tax rules date back to the 1920s and struggle with multinational tech giants that sell services remotely and attribute much of their profits to intellectual property held in low-tax jurisdictions.
“We want the international tax reform process to succeed and recognise this could mean Facebook paying more tax, and in different places,” Facebook’s vice-president for global affairs and a former British deputy prime minister Nick Clegg said.
But Italy, which will seek wider international backing for the plans at a meeting of the G20 in Venice next month, said the proposals were not just aimed at US firms.
US Treasury Secretary Janet Yellen said European countries would scrap existing digital services taxes which the United States says discriminate against US businesses as the new global rules go into effect.
“There is broad agreement that these two things go hand in hand,” she said.
Key details remain to be negotiated over the coming months. Saturday’s agreement says only “the largest and most profitable multinational enterprises” would be affected.
European countries had been concerned that this could exclude Amazon – which has lower profit margins than most tech companies – but Yellen said she expected it would be included.
How tax revenues will be split is not finalised either, and any deal will also need to pass the US Congress.