British Chancellor of the Exchequer Rishi Sunak (from left), US Treasury Secretary Janet Yellen, IMF Managing Director Kristalina Georgieva and Canada’s Treasury Secretary Chrystia Freeland chatting on the first day of the Seven Treasury Ministers’ meeting at Lancaster House in London on June 4, 2021.
Stefan Rousseau | AFP | Getty Images
LONDON – Treasury ministers of the most advanced economies, known as the Group of Seven, have backed a US proposal requiring companies around the world to pay at least 15% corporate income tax.
“Today, after years of discussion, the finance ministers of the G-7 reached a historic agreement to reform the global tax system, make it fit for the global digital age – and above all to ensure that it is fair to the right companies paying the right taxes in the right places, “said UK Treasury Secretary Rishi Sunak in a video statement on Saturday.
Under the deal, the G-7 will support a minimum global corporate tax of at least 15%, Sunak said in a series of tweets. The reforms will affect the largest companies in the world with profit margins of at least 10%.
When completed, it would represent a major development in global taxation. Members of the G-7 are Canada, France, Germany, Italy, Japan, Great Britain and the USA
US Treasury Secretary Janet Yellen, who is in London for the face-to-face meeting, hailed the move as significant and unprecedented.
“This global minimum tax would end the race to the bottom in corporate taxation and ensure fairness for the middle class and working population in the US and around the world,” she tweeted.
President Joe Biden and his administration originally proposed a minimum global tax rate of 21% to end a race to the bottom between different countries in attracting international businesses. However, after tough negotiations, a compromise was reached to set the bar at 15%.
A global deal in this area would be good news for countries on budget struggling to rebuild their economies after the coronavirus crisis.
But Biden’s idea was not received with the same enthusiasm around the world. Britain, for example, did not immediately support the proposal.
US President Joe Biden speaks at a meeting with a bipartisan group of Congressmen.
Swimming pool | Getty Images News | Getty Images
The issue can also be controversial within the European Union, where different member states levy different corporate tax rates and thereby attract well-known companies. Ireland’s tax rate, for example, is 12.5%, while France’s can be up to 31%.
In an April speech, Irish Treasury Secretary Paschal Donohoe said smaller nations should have lower tax rates because they don’t have the same scalability as larger economies, the Guardian reported.
The world’s most powerful economies have been arguing over taxation for some time, especially amid plans to tax digital giants more heavily. During the presidency of Donald Trump, the USA spoke out vehemently against digital tax initiatives in various countries and threatened the introduction of trade tariffs.