G-7 nations reach 'historic' agreement over global corporate tax

We commit to a global minimum tax of at least 15 per cent on a country by country basis, says statement

LONDON:

Finance ministers from wealthy G-7 nations on Saturday pledged to commit to a global minimum corporate tax of at least 15 per cent, rallying behind a US-backed plan.

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

The G-7 hopes to reach a final agreement at the July gathering of the expanded G-20 finance ministers group, it added.

"I'm delighted to announce that G-7 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 G-7 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".

Read more: Britain hosts first G7 foreign ministers meeting since start of pandemic

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 G-7 leaders in Cornwall, southwest England, starting Friday.

US President Joe Biden is set to attend next week's summit on his first foreign tour since taking office in January, while later Saturday US Treasury Secretary Janet Yellen will hold a press conference following the G-7 meeting.

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.

Biden had called for a unified minimum corporate tax rate of 15 percent in negotiations with the Organisation for Economic Co-operation and Development (OECD) and G-20.

French economy minister Bruno Le Maire had told journalists in London that 15 percent is "a minimum. For us, it's a starting point".

Along with its G-7 and G-20 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 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.

Read: Britain offers all over-50s first Covid-19 shots in boost for PM Johnson

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" 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.