G7 nations 'just 1 millimeter' from historic tax deal

Ruben Fields
June 6, 2021

Some of the world's richest nations are within touching distance of a historic deal to close the net on large companies which do not pay their fair share of tax, France and Germany said on Friday after a day of talks in London. In a bid to try and stop the shifting of funds to tax-efficient countries, the G7 has agreed to take away some of the benefit gained from the revenue movements.

The Group of Seven wealthy democracies agreed Saturday to support a global minimum corporate tax of at least 15% in order to deter multinational companies from avoiding taxes by stashing profits in low-rate countries.

Beyond the level itself, just as important for Britain and many others is that large multinationals pay more tax where they make their sales - not just where they book profits, or locate their headquarters.

Ms Yellen said European countries would scrap existing digital services taxes which the United States says discriminate against USA businesses as the new global rules go into effect.

"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", said a communique released after the meeting.

British finance minister Rishi Sunak, who is chairing the talks, also wants large companies to be required to declare their environmental impact in a consistent way. The U.S. considers those unilateral digital taxes to be unfair trade measures that single out big U.S. tech companies such as Google, Amazon and Facebook.

The G7 statement echoes a US proposal to let countries tax part of the earnings of the "largest and most profitable multinational enterprises - digital or not - if they are doing business within their borders".

The fairer system will mean the United Kingdom will raise more tax revenue from large multinationals and help pay for public services here in the United Kingdom, the Treasury department said.

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"It's a starting point and in the months ahead we will fight for this minimum tax to be the highest possible", Le Maire said in a video message on Twitter. The endorsement from the G7 could help build momentum for a deal in wider talks among more than 135 countries being held in Paris as well as a Group of 20 finance ministers meeting in Venice in July.

Britain's Chancellor of the Exchequer Rishi Sunak (back C) and U.S. Treasury Secretary Janet Yellen, (C, R), at a meeting of finance ministers from across the G7 nations at Lancaster House in London on June 4, 2021.

Among the G-7 nations, Japan, France and Germany supported the US proposal.

President Biden has called for a unified minimum corporate tax rate of 15 percent in negotiations with the Organisation for Economic Co-operation and Development (OECD) and G20.

German finance minister Olaf Scholz said the deal was "bad news for tax havens around the world".

Part of the agreement Saturday is that other countries would repeal their unilateral digital taxes in favor of a global agreement.

Britain wants multinationals to pay taxes that reflect their operations, as governments seek to fix finances battered by slashed tax receipts plus vast spending and borrowing during the pandemic.

They say that a "race to the bottom" saps precious revenues that could go to government priorities like hospitals and schools.

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