G7 nations back 15% global minimum tax

LONDON: Finance ministers from wealthy G7 nations on Saturday pledged to commit to a global minimum corporate tax of at least 15%, rallying behind a US-backed plan.

“We... commit to a global minimum tax of at least 15% on a country by country basis,” said a statement at the conclusion of their London meeting.

The G7 hopes to reach a final agreement at the July gathering of the expanded G20 finance ministers group, it added.

“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. The talks have prepared the ground for a broader summit of G7 leaders in Cornwall, southwest England, starting on Friday.

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 at a time when economies around the world are reeling from the impact of the coronavirus pandemic.

German finance minister Olaf Scholz on Friday told reporters it was the “right time” for a global tax deal given the vast sums spent by governments “to protect citizens, stabilise the economy and save jobs” since last year.

US President Joe Biden had called for a unified minimum corporate tax rate of 15% in negotiations with the Organisation for Economic Co-operation and Development (OECD) and G20. French economy minister Bruno Le Maire had told journalists in London that 15% is “a minimum. For us, it’s a starting point”.

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% tax rate is one of the lowest in the world, prompting tech giants such as Facebook and Google to make Ireland the home of their European operations.

Proponents argue that a minimum tax is necessary to stem competition between countries over who can offer multinationals the lowest rate. They say that 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”.

The global minimum tax would also help the global economy thrive, by levelling the playing field for businesses.

JANET YELLEN, US treasury secretary