The world’s wealthiest countries signed a landmark global agreement to confront tax avoidance and ensure that giant tech companies pay their fair share, said British finance minister Rishi Sunak.
The Group of Seven said it would back a minimum global corporation tax rate of at least 15 percent and put measures to ensure taxes were paid in the countries where businesses operate.
Mr. Sunak said the deal would create a level playing field for companies worldwide.
“After years of discussion, G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age,” he told reporters. The deal will pressure other countries to adopt a similar measure when leaders gather at a G20 meeting next month.
German Finance Minister Olaf Scholz hailed the deal as “excellent news for justice and fiscal solidarity”.
“Enterprises can no longer shy away from their financial obligations by cunningly transferring their profits to countries with opaque tax structures,” he said, calling the move “bad news for tax havens”.
Momentum has grown behind the US-led plans to limit the ability of multinationals like tech giants to game the tax system to boost profits, especially when economies around the world are reeling from the impact of the coronavirus pandemic. Ministers from the UK, Canada, France, Germany, Italy, Japan, and the United States met face-to-face in London for the first time since the COVID-19 pandemic.
According to a copy of the final agreement seen by Reuters, the G7 ministers said they would “commit to a global minimum tax of at least 15 percent on a country-by-country basis”.
“We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20 percent of profit exceeding a 10 percent margin for the largest and most profitable multinational enterprises,” the text added. Along with its G7 and G20 partners, France wants “a more ambitious level of taxation”, the minister said, with the current pandemic crisis showing that “tax evasion, the race towards the lowest possible level of taxation, is a dead-end”.
At the same time, Ireland has expressed “significant reservations” about Biden’s plan.
Its 12.5-percent tax rate is one of the lowest globally, prompting tech giants such as Facebook and Google to make Ireland the home of their European operations.
The ministers also agreed to make companies declare their environmental impact in a more standard way so investors can decide more quickly whether to fund them, a key goal for Britain.
Wealthy nations have struggled for years to agree on raising more revenue from large multinationals such as Google, Amazon, and Facebook, which often book profits in jurisdictions where they pay little or no tax.
Proponents argue that a minimum tax is necessary to stem competition between countries over who can offer multinationals the lowest rate. They say a “race to the bottom” saps precious revenues that could go to government priorities like hospitals and schools.
Corporate tax is one of two pillars in efforts for global fiscal reform, the other being a “digital tax” to allow countries to tax the profits of multinationals headquartered overseas.
Britain wants multinationals to pay taxes that reflect their operations as governments seek to repair finances battered by slashed tax receipts plus vast spending and borrowing during the pandemic.
