G7 countries reach agreement on global tax plan | Financial

The finance ministers of the United Kingdom, France, Italy, Japan, Canada, Germany and the United States met in London to discuss the White House’s plan for an international minimum tariff. The deal ends transatlantic tensions that for years undermined negotiations between some 140 countries over updating age-old tax rules.

The aim of the agreement is to prevent large companies from shifting their profits to avoid tax levies, for example via letterbox companies. The companies have to pay more tax in the countries where they operate.

“I am very pleased to announce that after years of discussions, G7 finance ministers have reached a landmark agreement today to reform the global tax system,” UK Chancellor of the Exchequer Rishi Sunak said in a statement. The reform will make the system fit for the global digital age. He also called the agreement critical to ensuring that “the right companies pay the right taxes in the right place”.

According to his American colleague Janet Yellen, the global minimum tax could end “the race to the bottom” in corporate tax. She also says the deal will bring justice to the middle class and working people in the US and worldwide.

French Finance Minister Bruno Le Maire said the plan also covers digital taxation and ensures a minimum rate of at least 15 percent. The G7 countries will seek the support of the G-20, starting with a meeting next month in Venice.

Many technical details still need to be decided in the coming weeks, the G7 previously indicated. A breakthrough was already reached on Friday about how the proceeds from taxing tech companies should be distributed.

The G7 has also agreed to the principle of a global minimum corporate tax rate for large companies of at least 15 percent. The measures will also help crack down on tax avoidance. That has always proved difficult so far, as the US did not want to distinguish between digital companies and other companies in new rules. However, there was a desire from Europe to tackle tech companies explicitly. A final agreement may not be reached until this autumn, partly because some countries must first pass national laws.

–