G7 strikes historic agreement over global corporate tax
Finance ministers from the G7’s wealthiest nations adopted a global minimum corporation tax rate of at least 15% on Saturday, rallying behind a US-backed plan aimed at tech behemoths and other multinationals accused of underpaying taxes.
The “unprecedented commitment” was praised by US Treasury Secretary Janet Yellen, who said in a statement that a global minimum tax “would put an end to the race to the bottom in corporate taxation.”
Despite the fact that Facebook faces the threat of having to pay more tax, the social media behemoth backed the initiative, which non-governmental organisations claimed did not go far enough.
Following the two-day meeting in London, the G7 agreed to “commit to a global minimum tax of at least 15% on a country-by-country basis,” according to a final communiqué.
The G7, which includes the United Kingdom, Canada, France, Germany, Italy, Japan, and the United States, said it wanted to secure a final tax agreement at the expanded G20 finance ministers meeting in July.
The G7 also agreed that businesses must report on the climate effect of their investments on a regular basis.
It also stated that it will continue to assist “the poorest and most vulnerable countries” in addressing “the health and economic concerns related to Covid-19.”
The UK Treasury stated that “the largest and most profitable multinationals will be expected to pay tax in the countries where they operate — not just where they have their headquarters” in regards to the tax obligation.
Facebook’s vice president of global affairs, Nick Clegg, welcomed the decision, writing on Twitter that the business wants “the international tax reform process to succeed and recognise this could entail… paying more tax, and in various areas.”
Rishi Sunak, the British finance minister, who presided over the in-person negotiations after the Covid-19 constraints were eased, expressed delight at the “historic agreement to change the global tax system.”
Sunak hailed his counterparts for achieving “a deal of historic significance,” saying the G7 had agreed to make the system “fit for the global digital era.”
The historic decision comes as governments try to rebuild budgets that have been ravaged by lower tax collections, as well as massive spending and borrowing, as a result of the pandemic.
The London meeting has also laid the groundwork for the G7 leaders’ summit, which will begin on Friday in Cornwall, southwest England, and which Biden is expected to attend.
The US-led efforts to limit multinationals’ capacity to manipulate the tax system to maximise profits, particularly at a time when economies throughout the world are hurting from the effect of the coronavirus pandemic, have gained traction.
The commitment was “really good news for justice and fiscal solidarity,” German Finance Minister Olaf Scholz said on Saturday.
“Enterprises can no longer avoid their fiscal commitments by cleverly moving revenues to nations with opaque tax structures,” he said, describing the action as “bad news for tax havens.”
It is a “historic move” in the fight against tax evasion, according to French Finance Minister Bruno Le Maire.
“It’s a beginning point, and we will work to make this minimum tax the highest possible in the months ahead,” Le Maire said in a video message on Twitter.
In negotiations with the Organization for Economic Cooperation and Development and the G20, Biden had proposed for a harmonised minimum corporate tax rate of 15%.
The G7 agreement, according to OECD Secretary-General Mathias Cormann, is a “watershed moment” toward the “global consensus required to change the international tax system.” The agreed minimum wage, according to the British charity Oxfam, is not high enough.
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