Finance ministers from wealthy G7 nations yesterday pledged to commit to a global minimum corporate tax of at least 15 percent, rallying behind a US-backed plan.
“We ... commit to a global minimum tax of at least 15 percent on a country-by-country basis,” said a statement at the conclusion of their London meeting.
The G7 hopes to reach a final agreement at next month’s gathering of the expanded G20 finance ministers group, it added.
“I’m delighted to announce that G7 finance ministers ... have reached a historic agreement to reform the global tax system,” said British Chancellor of the Exchequer Rishi Sunak, who chaired the two days of talks held in person after an easing of COVID-19 restrictions.
It was attended by finance ministers from Canada, France, Germany, Italy, Japan and the US.
Sunak said the G7 had agreed to make the global tax system “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.”
He thanked his counterparts for striking “a deal of historic significance that finally brings our global tax system into the 21st century.”
The landmark move is aimed at getting multinationals — especially tech giants — to pay more into government coffers, which have been severely hit during the COVID-19 pandemic.
The talks have prepared the ground for a broader summit of G7 leaders in Cornwall, England, starting on Friday.
US President Joe Biden is set to attend next week’s summit on his first foreign tour since taking office in January.
Momentum has grown behind the US-led plans to limit the ability of multinationals like tech giants to game the tax system to boost profits, especially at a time when economies around the world are reeling from the effects of the pandemic.
German Minister of Finance Olaf Scholz on Friday told reporters that it was the “right time” for a global tax deal given the vast sums spent by governments “to protect citizens, stabilize the economy and save jobs” since last year.
Biden had called for a unified minimum corporate tax rate of 15 percent in negotiations with the Organisation for Economic Co-operation and Development (OECD) and G20.
French Minister of Economy and Finance Bruno Le Maire had told journalists in London that 15 percent is “a minimum. For us, it’s a starting point.”
Along with its G7 and G20 partners, France wants “a more ambitious level of taxation,” he said, with the pandemic showing that “tax evasion, the race toward the lowest possible level of taxation, is a dead end.”
At the same time, Ireland has expressed “significant reservations” about Biden’s plan. Its 12.5 percent tax rate is one of the lowest in the world, prompting tech giants such as Facebook and Google to make Ireland the home of their European operations.
Proponents argue that a minimum tax is necessary to stem competition between countries over who can offer multinationals the lowest rate.
They say that a “race to the bottom” saps precious revenues that could go to government priorities like hospitals and schools.
Corporate tax is one of two pillars in efforts for global fiscal reform, the other being a “digital tax” to allow countries to tax the profits of multinationals headquartered overseas.
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