The G7 & United States, Britain, and other leading nations approached a landmark deal on Saturday to pursue higher global taxation on multinational enterprises such as Amazon, Google, Apple. 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 large advanced Nations allowed to back a minimum global corporate rate of at least 15 percent and for businesses to pay more tax in the markets where they trade goods and services.
“G7 finance ministers have reached a historic agreement to transform 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.
U.S. 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 U.S. technology giants.
However, the measures will first need to find a broader agreement at a meeting of the G20, which includes many emerging economies – due to take place next month in Venice.
“It’s complicated and this is a first step,” Sunak said.
The ministers also agreed to make companies declare their environmental impact more standard so investors can decide more easily whether to fund them, which is crucial for Britain.
Prosperous nations have struggled for years to agree on raising more revenue from large multinationals such as Google, Amazon, and Facebook, which frequently book profits in jurisdictions where they pay little or no tax.
U.S. President Joe Biden’s government gave the delayed talks fresh impetus by offering a minimum global corporation tax rate of 15 percent, above the level in Ireland but underneath the most low level in the G7.
Germany, including France, also welcomed the deal, although French Finance Minister Bruno Le Maire stated he would fight for a giant global minimum corporate tax rate of 15 percent, which he defined as a “starting position.”
German finance statesman Olaf Scholz said the agreement was “bad news for tax harbors around the planet. Companies will no longer be in a situation to dodge their tax obligations by engaging their profits in the lowest-tax nations,” he added.
Irish economics statesman Paschal Donohoe, whose nation is potentially a big loser with its 12.5% tax rate, said any global agreement also needed to acknowledge smaller countries.
Sunak said the agreement was an “enormous advantage” for taxpayers, but it was too soon to know how much money it would raise for Britain.
The deal does not clarify which companies will be covered by the rules, applying only to “the largest and most profitable multinational Enterprises.”
European nations have worried that a business such as Amazon could slip through the net as it records lower profit margins than most other well-known technology corporations.