G-7 finance ministers agree minimum global corporation tax rate of at least 15%

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G-7 finance ministers in London on June 5, 2021.

LONDON (REUTERS) – The United States, Britain and other leading nations reached a landmark deal on Saturday (June 5) to pursue higher global taxation on multinational businesses such as Google, Apple and Amazon. 

In a move that could raise hundreds of billions of dollars to help them cope with the aftermath of Covid-19, the Group of Seven (G-7) large advanced economies agreed to back a minimum global corporate rate of at least 15 per cent and for companies to pay more tax in the markets where they sell goods and services. 

“G-7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age,” British finance minister Rishi Sunak said after chairing a two-day meeting in London. 

US Treasury Secretary Janet Yellen said the “significant, unprecedented commitment” would end what she called a race to the bottom on global taxation. 

The deal, which was years in the making, also promises to end national digital services taxes levied by Britain and other European countries which the United States said unfairly targeted US technology giants. 

However, the measures will first need to find broader agreement at a meeting of the G-20 – which includes a number of emerging economies – due to take place next month in Venice. 

“It’s complicated and this is a first step,” Mr Sunak said. 

The ministers also agreed to move towards making companies declare their environmental impact in a more standard way so investors can decided more easily whether to fund them, a key goal for Britain. 

Rich nations have struggled for years to agree a way to raise more revenue from large multinationals such as Google, Amazon and Facebook, which often book profits in jurisdictions where they pay little or no tax. 

US President Joe Biden’s administration gave the stalled talks fresh impetus by proposing a minimum global corporation tax rate of 15 per cent, above the level in countries such as Ireland but below the lowest level in the G-7.  

Amazon and Google welcomed the agreement and Facebook said it would likely pay more tax. 

Mr Nick Clegg, Facebook’s vice-president for global affairs and a former British deputy prime minister, said: “We want the international tax reform process to succeed and recognise this could mean Facebook paying more tax, and in different places.” 

But some campaign groups condemned what they saw as a lack of ambition. International development charity Oxfam also said the minimum tax rate should be much higher.

“They are setting the bar so low that companies can just step over it,” Oxfam’s head of inequality policy Max Lawson said.

Germany and France welcomed the agreement, although French Finance Minister Bruno Le Maire said he would fight for a higher global minimum corporate tax rate than 15 per cent, which he described as a “starting point”. 

German finance minister Olaf Scholz said the deal was “bad news for tax havens around the world”. 

“Companies will no longer be in a position to dodge their tax obligations by booking their profits in the lowest-tax countries,” he added. 

G-7 finance ministers agree minimum global corporation tax rate of at least 15%

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Irish finance minister Paschal Donohoe, whose country is potentially a big loser with its 12.5 per cent tax rate, said any global deal also needed to take account of smaller nations. 

Mr Sunak said the deal was a “huge prize” for taxpayers, but it was too soon to know how much money it would raise for Britain. 

The agreement does not make clear exactly which businesses will be covered by the rules, referring only to “the largest and most profitable multinational enterprises”. 

European countries have feared that a business such as Amazon could slip through the net as it reports lower profit margins than most other well-known technology companies.

The G-7 includes the United States, Japan, Germany, Britain, France, Italy and Canada.

G-7 finance ministers agree minimum global corporation tax rate of at least 15%

 

 

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