The finance ministers of the rich countries of the Group of Seven (G7) reached a key agreement on Saturday that supported the creation of a global minimum corporate tax rate of at least 15% in an effort to close the gaps cross-border taxes used by some corporations.
“We are committed to a global minimum tax of at least 15 per cent country-by-country,” the G7 said in a statement at the end of the London meeting.
Major economies aim to deter multinationals from shifting profits and tax revenues to low-tax countries, regardless of where their sales are made.
Increasingly, revenues from intangible sources such as drug patents, software, and intellectual property rights have migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.
The G7 agreement feeds on an existing, much broader effort. For years, the Organization for Economic Co-operation and Development has been coordinating tax negotiations between 140 countries on rules for taxing digital cross-border services and curbing the erosion of the tax base, including a global minimum corporate tax.
The G7 hopes to reach a final agreement at the July meeting of the enlarged group of G20 finance ministers, he added. If a broad consensus is reached, it will be extremely difficult for any low-tax country to try to block a deal.
“I am pleased to announce that G7 finance ministers … have reached a historic agreement to reform the global tax system,” said British Finance Minister Rishi Sunak, who chaired the two days of talks held in person after relief of COVID-19 restrictions. .
Peers from Canada, France, Germany, Italy, Japan, and the United States attended.
Sunak said the G7 had agreed that the global tax system “should adapt to the global digital age and fundamentally ensure that it was fair for the right companies to pay the right taxes in the right places.”
He thanked his counterparts for reaching “an agreement of historic significance that ultimately brings our global tax system into the 21st century.”
The most important step is aimed at getting multinationals, especially technology giants, to pay more to government coffers, which have been severely affected during the pandemic.
Talks have set the stage for a wider summit of G7 leaders in Cornwall, in the south-west of England, starting on Friday.
U.S. President Joe Biden will attend next week’s summit on his first foreign tour since taking office in January, while on Saturday, U.S. Treasury Secretary Janet Yellen , will hold a press conference after the G7 meeting.
Yellen said Saturday’s deal “provides a huge boost” to a global deal that “puts an end to the bottom-up race in corporate taxation and ensures justice for the middle class and working people in the USA and around the world “.
France hailed the deal and claimed credit for acting as a catalyst.
“We have succeeded! After four years of battle, a historic agreement has been reached with the G7 member states,” he tweeted to French Finance Minister Bruno Le Maire. “France can be proud!”
Facebook welcomed the deal, though it could mean the social network pays more taxes and in different places, its global affairs chief Nick Clegg said on Saturday.
“Facebook has long been calling for a reform of global tax rules and we welcome the significant progress made at the G7,” Clegg said on Twitter. “Today’s agreement is a significant first step towards security for businesses and strengthening public confidence in the global tax system.”
But the Oxfam campaign group found the deal inappropriate.
“It is absurd that the G7 claims that it is ‘reviewing a broken global tax system’ by setting a global minimum corporate tax rate that is similar to the soft rates charged by tax havens such as Ireland, Switzerland and Singapore. They are setting the bar. so low that companies can only surpass it, ”Oxfam said.
“Stopping the explosion of inequality caused by COVID-19 and tackling the climate crisis will be impossible if companies continue to pay virtually no taxes …”. It’s not a fair deal. “