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The G7’s advanced economies have reached what they have called a “historic agreement” on the imposition of multinationals in an attempt to create an unstoppable impetus for a global agreement.
A statement on Saturday showed that the United States, Japan, Germany, France, the United Kingdom, Italy and Canada had found enough commitment to prevent companies from transferring profits to low-tax jurisdictions and ensure that larger multinationals pay more taxes where they operate.
The agreement was hailed by finance ministers and represents an important step forward in the negotiations started in 2013.
Rishi Sunak, chancellor of the United Kingdom, welcomed the agreement as chairman of the group this year. “My financial counterparts and I have reached a historic agreement on global tax reform that requires the big multinational technology giants to pay their fair share of taxes in the UK,” he said.
The UK’s priority in the talks has been to increase revenue for companies such as Apple, Google and Facebook.
Sunak’s enthusiasm was shared by other G7 finance ministers. U.S. Treasury Secretary Janet Yellen said the deal was an “unprecedented significant commitment” to a minimum corporate tax minimum of at least 15%, which will significantly increase corporate tax revenue in the U.S. .
Olaf Scholz, the German finance minister, said the deal was “very good news for tax justice and solidarity and bad news for tax havens around the world.”
Bruno Le Maire, his French counterpart, said the G7 countries had “faced the challenge of this historic moment”, saying the deal paved the way for a global agreement at the G20 in Venice in July.
The detail of the first part of the agreement, a major concession from the United States by the Biden administration, made it clear that “the world’s largest companies” with profit margins of at least 10% should to allocate 20% of global profits in the future to the countries where they make their sales.
If implemented, this would bring down a century of international corporate taxation, where profits are only taxed when companies have a physical presence.
The definition of the world’s largest companies has yet to be clarified. This part of the agreement will require a comprehensive agreement later this year.
In exchange for this concession, the United States has reached the agreement of the rest of the G7 for each country to impose a minimum global corporate tax rate of at least 15%.
This will reduce the incentive for large companies to declare profits in tax havens or low tax jurisdictions, such as Ireland, because the country where the company is headquartered will be able to top up corporate tax payments. at the global minimum effective level.
The US is expected to be the main beneficiaries of this second pillar of the agreement.
On Friday night it was discussed whether the deal would set the world minimum at 15% or “at least” 15%, with France, among others, calling for the potentially higher rate in a bid to collect more revenue. of its largest companies.
One of the most contentious issues had been the demand of the United States for France, the United Kingdom and Italy to abandon their new digital taxes in exchange for gaining tax rights under this agreement. Janet Yellen, the U.S. Secretary of the Treasury, wanted this to be immediate, while European countries insisted they would abolish these taxes once any global agreement was sealed and ratified.
The statement showed that this part of the agreement had yet to be linked to specific commitments. “We will provide proper coordination between the application of the new international tax rules and the elimination of all taxes on digital services and other similar measures relevant to all businesses,” he said.
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