The United States, the United Kingdom and other major countries reached a landmark agreement on Saturday to require higher global taxes on multinational companies such as Google, Apple and Amazon. To help them deal with the consequences of COVID-19, the large advanced economies of the Group of Seven countries agreed to support a minimum global corporate tax rate of at least 15% and require companies to pay more taxes on the markets where they sell goods and services.
“The G7 finance has become a historic agreement to reform the global tax system and adapt it to the global digital age,” said British Finance Minister Rich Sunak after a two-day meeting in London.
U.S. Treasury Secretary Janet Yellen said that “significant, unprecedented commitments” will end what she calls global taxation competition.
The agreement, which has been brewing for many years, also promises to end the national digital service tax imposed by the United Kingdom and other European countries, which the United States claims unfairly target US technology giants.
However, these measures first require a broader agreement at the G20 meeting (including some emerging economies) to be held in Venice next month.
“It’s complicated, this is the first step,” Sunak said.
The ministers also agreed to allow companies to declare their environmental impacts in a more standard way so that investors can more easily decide whether to fund them, which is a key goal for the UK.
For years, rich countries have struggled to find a way to raise more revenue from large multinational companies such as Google, Amazon, and Facebook, which usually record profits in jurisdictions where they pay little or no taxes.
The administration of US President Joe Biden (Joe Biden) proposed a minimum global corporate tax rate of 15%, which is higher than the level of countries such as Ireland but lower than the lowest level in the G7, thus injecting new impetus into the deadlocked negotiations.
Germany and France also welcomed the agreement, although French Finance Minister Bruno Le Maire stated that he would strive to raise the world’s lowest corporate tax rate to more than 15%, which he called a “starting point.”
German Finance Minister Olaf Scholz said the deal was “bad news for the global tax haven.”
“Companies will no longer be able to evade tax liability by registering profits in the countries with the lowest taxes,” he added.
Irish Finance Minister Paschal Donohoe (Paschal Donohoe) said that the country could become a big loser at the 12.5% tax rate. He said that any global transaction also needs to take into account smaller countries.
Sunak said the transaction is a “huge reward” for taxpayers, but it is too early to know how much money it will raise for the UK.
The agreement does not specify which companies will be covered by these rules, but only mentions “the largest and most profitable multinational companies.”
European countries worry that companies like Amazon may slip through the net because it reports lower profit margins than most other well-known technology companies.
© Thomson Reuters 2021