Behind US-led plans to restrict the ability of multinational corporations like tech giants to play off the tax system to increase profits, momentum has grown, especially at a time when economies around the world are affected by the effects of the coronavirus outbreak are affected
The G-7 ministers basically agreed on a worldwide minimum tax rate of 15 percent for multinational companies in every country in which they operate
Treasury ministers of wealthy G7 nations on Saturday approved a minimum global tax rate of at least 15 percent and behind a US-backed plan aimed at tech giants and other multinational corporations accused of not paying enough.
US Treasury Secretary Janet Yellen hailed the “unprecedented commitment” and said in a statement that a global minimum tax “would end the race to the bottom in corporate taxation.”
Facebook even stood behind the move, despite the social media giant faced the prospect of paying more taxes – while NGOs said it wasn’t going far enough.
After the two-day meeting in London, the G7 announced in a final communiqué that they would “commit themselves to a minimum global tax of at least 15 percent on a country basis”.
The G7 – made up of the UK, Canada, France, Germany, Italy, Japan and the United States – said they hoped to reach a final tax deal at the meeting of the enlarged G20 finance ministers group in July.
The G7 has also committed to oblige companies to report on the climate impact of their investments.
It also said it would continue to support “the poorest and most vulnerable countries in addressing the health and economic challenges related to” COVID-19 “.
With regard to tax liability, the UK Treasury found that “the largest and most profitable multinationals pay taxes in the countries in which they operate, not just where they are headquartered”.
– ‘Historic Agreement’ –
Nick Clegg, Facebook’s vice president of global affairs, welcomed the move and tweeted that the company wanted “the international tax reform process to succeed and recognize that this could … pay more taxes and other places.”
British Treasury Secretary Rishi Sunak, who opened the talks after easing the COVID-19 Restrictions, welcomed “a historic deal to reform the global tax system”.
Sunak said the G7 had agreed to make the system “fit for the global digital age” and thanked his colleagues for making “an agreement of historic importance”.
The breakthrough comes as governments seek to repair finances troubled by reduced tax revenues, huge spending and borrowing during the pandemic.
The London meeting also paved the way for a summit of G7 leaders in Cornwall, south-west England, which will begin on Friday and will be attended by Biden.
The momentum has grown behind US-led plans to restrict the ability of multinational corporations like tech giants to play off the tax system to increase their profits, especially at a time when economies around the world are suffering from the impact of the Coronavirus Outbreak.
Federal Finance Minister Olaf Scholz said on Saturday that the commitment was “very good news for justice and fiscal solidarity”.
“Companies can no longer shy away from their tax obligations by cunningly transferring their profits to countries with opaque tax structures,” he said, calling the move “bad news for tax havens”.
“Much too low”
The French Finance Minister Bruno Le Maire called it a “historic step” in the fight against tax evasion.
“It is a starting point and in the coming months we will fight for this minimum tax to be as high as possible,” said Le Maire in a video message on Twitter.
In negotiations with the Organization for Economic Cooperation and Development and the G20, Biden had called for a uniform minimum tax rate of 15 percent.
OECD Secretary General Mathias Cormann described the G7 Agreement as “a groundbreaking step towards the global consensus necessary for reforming the international tax system”.
UK charity Oxfam said the agreed minimum rate was not high enough.
“The time has come for some of the world’s most powerful economies to force multinational corporations, including tech and pharmaceutical giants, to pay their fair share of taxes,” said Gabriela Bucher, executive director of Oxfam International.
“However, setting a global minimum tax rate of only 15 percent is far too low. It will do little to end the harmful race to the bottom in corporate taxes and curb the widespread use of tax havens.”
Ireland, which has expressed “significant reservations” about Biden’s plan, has one of the lowest corporate tax rates in the world at 12.5 percent, prompting tech giants like Facebook and Google to base the Eurozone country on their European base.
Yellen, who held a press conference after the G7 meeting, noted that Ireland and China have concerns about a global minimum rate.
“The post-pandemic world needs to become fairer, particularly in terms of international taxation,” she added.
Proponents argue that a minimum tax is necessary to curb competition between countries as to who can offer the lowest tax rate to multinationals.
They say a “race to the bottom” is robbing valuable revenue that could flow to government priorities like hospitals and schools.