G-7 nations support a global minimum corporate tax of at least 15%

G-7 nations support a global minimum corporate tax of at least 15%

Wealthy Group of Seven democracies agreed on Saturday to support a global minimum corporate tax of at least 15% to deter multinational companies from avoiding tax by hiding their profits in low-rate countries.

G-7 finance ministers meeting in London also backed proposals to force the world’s largest companies, including US-based tech giants, to pay taxes in countries where they have high revenues. sales but do not have a physical headquarters.

US Treasury Secretary Janet Yellen, who led the US negotiations at the London meetings, said the deal provided tremendous momentum to reach a global deal that would end the race to the bottom in corporate taxes. societies and ensure fairness for the middle class and workers. people in the United States and around the world.

Speaking at a press conference from London on Saturday, she said members of the G-7 agreed the post-pandemic world needs to be fairer, especially when it comes to global taxes.

I think we’re going to end up with a much fairer tax system, Yellen said.

She said the details are yet to be worked out and will be negotiated at the next meetings of the larger group of 20. She said she believes they will reach a preliminary agreement with the larger group in July and details will be available. finalized in the fall.

International discussions on the tax issue gained momentum after US President Joe Biden endorsed the idea of ​​a global low of at least 15%, or even more, in corporate profits.

The tax proposals approved on Saturday have two main components. The first part allows countries to tax part of the profits made by companies that do not have a physical presence but have substantial sales, for example, through the sale of digital advertising.

The G-7 statement echoes a US proposal to simply allow countries to tax a portion of the profits of the largest and most profitable companies, digital or not, if they do business inside of their borders. He also supported granting countries the right to tax 20% or more of profits above a 10% profit margin.

Part of the deal is that countries like France that have imposed taxes on digital services would eliminate them in favor of the global deal. The United States views these unilateral digital taxes as unfair trade measures that put big U.S. tech companies like Google, Amazon, and Facebook on display.

The other main part of the proposal is that countries tax the foreign income of their local businesses at a rate of at least 15%. This would discourage the practice of using accounting schemes to shift profits to a few very low tax countries.

Nations grapple with the question of how to deter businesses from legally evading tax by resorting to tax havens, typically small countries that attract businesses with low or no taxes, even if businesses do little. business. real there.

According to an analysis by the Institute on Taxation and Economic Policy, a left-wing nonprofit tax policy organization, at least 55 of the largest companies did not pay any federal business income in the fiscal year more recent.

Nick Clegg, Facebook’s vice president of global affairs, said on Twitter on Saturday that the company welcomed the progress made at the G-7.

Facebook has long called for reform of global tax rules and we welcome the significant progress made in the G7. Today’s agreement is an important first step towards certainty for businesses and building public confidence in the global tax system, said Clegg.

UK Treasury Chief Rishi Sunak, host of the meeting, said the international tax agreement will reform the global tax system to adapt it to the global digital age and, most importantly, to ensure that it is fair, so that the right companies pay the right tax in the country. good places.

France applauded Saturday’s deal and congratulated itself on having played the role of a catalyst.

We did it! After 4 years of battle, a historic agreement has been reached with the G7 member states, French Finance Minister Bruno Le Maire tweeted. France can be proud!

The finance ministers ‘meeting preceded the annual G-7 leaders’ summit scheduled for June 11-13 in Cornwall, England.

G-7 support could help build momentum for agreement in broader talks between more than 140 countries that will take place in Paris, as well as a meeting of the Group of 20 finance ministers in Venice in July.

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