In a move that could raise hundreds of billions of dollars to help them cope with the aftermath of COVID-19, the Group of Seven major advanced economies agreed to support a minimum global corporate rate of at least 15% and that the companies pay more taxes. in the markets where they sell goods and services.
“The G7 finance ministers have reached a historic agreement to reform the global tax system to suit the global digital age,” said British Finance Minister Rishi Sunak after chairing a two-day meeting in London.
The years-long deal also promises to end national taxes on digital services imposed by Britain and other European countries that the United States unfairly targeted American tech giants.
However, the measures will first need to find a broader agreement at a G20 meeting, which includes several emerging economies, which will take place next month in Venice.
“It’s complicated and this is the first step,” Sunak said.
The ministers also agreed to move forward to have companies declare their environmental impact in a more standard way so that investors can more easily decide whether to finance them, a key goal for Britain.
Rich nations have struggled for years to agree on a way to raise more revenue from large multinationals like Google, Amazon, and Facebook, which often record profits in jurisdictions where they pay little or no tax.
The administration of US President Joe Biden gave new impetus to the stalled talks by proposing a minimum global corporate tax rate of 15%, above the level in countries like Ireland but below the lowest level of the G7.
Germany and France also welcomed the deal, although French Finance Minister Bruno Le Maire said he would fight for a global minimum corporate tax rate above 15%, which he described as a “starting point.”
German Finance Minister Olaf Scholz said the deal was “bad news for tax havens around the world.”
“Companies will no longer be in a position to evade their tax obligations by posting their profits in the countries with the lowest taxes,” he added.
Irish Finance Minister Paschal Donohoe, whose country is potentially a big loser with its 12.5% tax rate, said any global deal must also take smaller nations into account.
Sunak said the deal was a “great prize” for taxpayers, but that he was too early to know how much money it would raise for Britain.
The agreement does not clarify exactly which businesses will be covered by the rules, referring only to “the largest and most profitable multinational companies.”
European countries have feared that a company like Amazon could sneak online as it reports lower profit margins than most other well-known tech companies.