History: the G7 decided on a 15% tax on multinationals – economic, financial and economic news

The finance ministers of the G7, which brings together Canada, the United States, Japan, France, Germany, Italy and the United Kingdom, today reached a “historic” agreement for lay the foundations for the new international tax regime by introducing a universal minimum tax of 15% for large companies.

British Finance Minister Rishi Sunak confirmed the pact reached by ministers, meeting in London – for the first time in two years, due to the pandemic – and explained that he is seeking toonbuilding a balanced playing field for global businesses.

“After years of debate, G7 finance ministers have reached a historic agreement to reform the global tax system to adapt it to the global digital age “, cited BBC a Sunak.

Global companies like Amazon, Google or Facebook will be the most affected, since they can now legally tax in one country with favorable tax conditions the business they generate in other countries. With this change, rich countries are seeking to avoid a “race to the bottom” of fiscal policies.

In addition, this standard aims that companies pay in the countries where they sell their products and services and not where they report their profits.

The initiative is “to adapt to the global digital age, but above all to making sure the right companies pay the right taxes in the right places And that’s a huge price for UK taxpayers, ”Sunak noted.

The United States Secretary of the Treasury pointed out that “Global minimum rate ends race to lower corporate tax and secures justice for the middle class and working people in the United States and around the world. “

The meeting of G7 finance ministers will be followed next week after the summit of G7 leaders, meeting from June 11 to 13. Although The G7 does not have a formal role in the process of discussing the new international taxation, a pact within this group will provide a powerful impetus to reach an agreement in the formal negotiations that are developing in this regard in the G20 and in the OECD.

In this direction, The United States has lowered its aspirations for a global minimum corporate tax, reduce them from 21% to an effective rate of 15% in order to broaden the consensus in this regard.

world minimum tax: what is it and what does it mean

Agree with Reuters, the agreement aims to end what United States Secretary of the Treasury Janet Yellen described as a “30-year race to the bottom of corporate tax rates”, in a competition to attract multinationals.

Big economies want to discourage multinationals from shifting profits to low-tax countrieswherever your sales are made.

Increasingly, revenues from intangible sources – such as drug patents, software and intellectual property rights – have migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their countries of origin. ‘traditional origin.

How a global minimum tax would work

The overall minimum tax rate will apply to foreign income. Governments can always set whatever local tax rate they want, but if companies pay lower rates in a particular country, their home governments can “raise” their taxes to the minimum rate, which eliminates the benefit of transferring profits.

The OECD said last month that governments had agreed on the basic design of the minimum tax, but not the rate. Tax experts say this is the thorniest issue, although the G7 deal builds strong momentum around the 15% or higher level.

“Other points that still need to be negotiated are whether mutual funds and real estate mutual funds should be hedged, when to apply the new rate, and to ensure that it complies with U.S. tax reforms aimed at deter erosion, ”the agency said. .