G7 leaders agree on corporate minimum tax

Carla Harmon
June 5, 2021

The Group of Seven wealthy democracies agreed Saturday to support a global minimum corporate tax of at least 15% in order to deter multinational companies from avoiding taxes by stashing profits in low-rate countries.

Britain's Treasury chief Rishi Sunak, the meeting's host, said the deal would reform the global tax system to make it fit for the global digital age and to ensure "the right companies pay the right tax in the right places".

"This is a very proud moment and I want to thank my G7 finance minister colleagues for their collective leadership and for their willingness to work together to seize this moment to strike a deal of historic significance that finally brings our global tax system into the 21st century", Sunak said.

Facebook's vice-president for global affairs, Nick Clegg, said the deal is a big step toward increasing business certainty and raising public confidence in the global tax system but acknowledged it could cost the company.

The United States is also holding out for an immediate end to the digital services taxes levied by Britain, France and Italy, which it views as unfairly targeting US tech giants for tax practices that European companies also use.

KPMG's Corwin said the final statement was silent on several key points, including exactly which of the "largest and most profitable" multinationals would be covered by the proposal and how companies would be protected from double-billing if countries disagree on who has the right to tax them.

The talks were preparing the ground for a broader summit of G7 leaders in Cornwall, southwest England starting on June 11. It comes just over six months after the United Kingdom led the way by being the first country in the world to commit to do so in November 2020. "And I believe they have high expectations for what we all can agree over the coming days".

It additionally said it will continue to support "the poorest and most vulnerable countries as they address health and economic challenges associated with Covid-19".

The thorny topic of the regulation of digital currencies such as bitcoin will also be on the agenda.

U.S. Treasury Secretary Janet Yellen, on behalf of the White House, proposed a minimum global corporate tax rate of 15%, which is below the lowest rate of any of the G7 nations.

At the moment companies can set up local branches in countries that have relatively low corporate tax rates and declare profits there.

At the same time, Ireland has expressed "significant reservations" about Biden's plan.

"We made it! After 4 years of battle, a historic accord was reached with G7 member states", French Finance Minister Bruno Le Maire tweeted.

The UK-based anti-poverty organisation Oxfam argued that Biden's proposal of 15 percent was too little, with the charity's senior policy officer for France, Quentin Parrinello, telling AFP an agreement without a specific rate "would be a real failure".

The spotlight for the finance ministers this weekend will be on ambitious plans for a minimum level of corporate tax, as global powers seek to make multinationals pay their way.

Britain wants multinationals to pay taxes that reflect their operations, as governments seek to fix finances battered by slashed tax receipts plus vast spending and borrowing during the pandemic.

They say that a "race to the bottom" saps precious revenues that could go to government priorities like hospitals and schools.

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