G7 nations signs historic agreement on ‘global taxation’
Finance ministers from the Group of Seven (G7) rich nations reached a landmark accord on Saturday backing the creation of a global minimum corporate tax rate of at least 15 per cent in an effort to close cross-border tax loopholes used by some corporations.
“We … commit to a global minimum tax of at least 15 per cent on a country by country basis,” the G7 said in a statement at the conclusion of their London meeting. Major economies are aiming to discourage multinationals from shifting profits and tax revenues to low-tax countries regardless of where their sales are made.
Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries. The G7 accord feeds into a much broader, existing effort. The Organization for Economic Cooperation and Development has been coordinating tax negotiations among 140 countries for years on rules for taxing cross-border digital services and curbing tax-base erosion, including a global corporate minimum tax.
The G7 hopes to reach a final agreement at the July gathering of the expanded G20 finance ministers group, it added. If a broad consensus is reached, it will be extremely hard for any low-tax country to try and block an agreement. “I’m delighted to announce that G7 finance ministers have reached a historic agreement to reform the global tax system,” said British finance minister Rishi Sunak, who chaired the two days of talks held in person after an easing of COVID-19 restrictions.
It was attended by counterparts from Canada, France, Germany, Italy, Japan and the United States. Sunak said the G7 had agreed to make the global tax system “fit for the global digital age and crucially to make sure that it’s fair so that the right companies pay the right tax in the right places”. He thanked his counterparts for striking “a deal of historic significance that finally brings our global tax system into the 21st century”.
The landmark move is aimed at getting multinationals especially tech giants to pay more into government coffers, which have been severely hit during the pandemic.
