Group of Seven (G7), a group of the world’s richest nations, have reached a landmark deal to back a global minimum tax of at least 15 percent on multinational companies. G7 finance ministers meeting in London also agreed that the biggest companies should pay tax where they generate sales, and not just where they have a physical presence.
The G7 ministers said they will commit to a global minimum tax of at least 15 percent on a country by country basis. We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises, the agreement added. The ministers also agreed to move towards making companies declare their environmental impact in a more standard way so investors can decide more easily whether to fund them.
The accord, which could form the basis of a global pact next month, is aimed at ending a decades-long race to the bottom in which countries have competed to attract corporate giants with ultra-low tax rates and exemptions.
UK finance minister Rishi Sunak announced the agreement yesterday. The British finance minister said, G7 finance ministers hailing from Canada, France, Germany, Italy, Japan, the UK and the US have reached a historic agreement to reform the global tax system to make it 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.
US Treasury Secretary Janet Yellen said, the historic agreement on a global minimum tax would end the race to the bottom in corporate taxation and ensure fairness for the middle class and working people in the US around the world.
German minister of Finance Olaf Scholz, said companies will no longer be in a position to dodge their tax obligations by booking their profits in lowest-tax countries.