G-7 nations reach historic deal on global tax reform
The finance ministers of the most advanced economies, known as the Group of Seven, have backed a U.S. proposal that calls for corporations around the world to pay at least a 15% tax on earnings.
“G-7 finance ministers today, after years of discussions, have reached a historic agreement to reform the global tax system, to make it fit for the global digital age — and crucially to make sure that it’s fair so that the right companies pay the right tax in the right places,” U.K. Finance Minister Rishi Sunak announced in a video statement on Saturday.
If finalized, it would represent a significant development in global taxation. Members of the G-7, which include Canada, France, Germany, Italy, Japan, the U.K. and the U.S., will convene for a summit in Cornwall, U.K., next week.
An agreement among this group would provide needed momentum for upcoming talks planned with 135 countries in Paris. Finance ministers from the Group of 20 are also expected to meet in Venice in July.
“We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises,” according to a statement from the G-7 finance ministers.
“We will provide for appropriate coordination between the application of the new international tax rules and the removal of all Digital Services Taxes, and other relevant similar measures, on all companies,” it said.
U.S. Treasury Secretary Janet Yellen, who is in London for the face-to-face meeting, hailed the move as significant and unprecedented.
“That global minimum tax would end the race-to-the-bottom in corporate taxation, and ensure fairness for the middle class and working people in the U.S. and around the world,” she tweeted.
President Joe Biden and his administration had initially suggested a minimum global tax rate of 21% in an attempt to prevent countries luring international businesses with low or zero taxes. However, after tough negotiations, a compromise was reached to set the bar at 15%.
A global deal in this field would be good news for cash-strapped nations, who are trying to rebuild their economies after the coronavirus crisis.
But Biden’s idea had not been received with the same level of excitement across the world. The U.K., for example, did not immediately voice its support for the proposal.
Reference: CNBC
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