Ministers, Facebook hail G7 plan for 15 per cent minimum corporate tax globally

US Treasury Secretary Janet Yellen after attending the G7 finance ministers meeting. Picture: AFP
US Treasury Secretary Janet Yellen after attending the G7 finance ministers meeting. Picture: AFP

Finance ministers from wealthy G7 nations on Saturday pledged to commit to a global minimum corporate tax of at least 15 per cent, rallying behind a US-backed plan aimed in particular at high-tech multinationals.

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

The G7 hopes to reach a final agreement at the July gathering of the expanded G20 finance ministers group, it said.

Facebook welcomed the G7 pledge, its vice-president of global affairs said Saturday.

“We welcome the important progress,” Nick Clegg tweeted after the agreement by the G7 group of wealthy nations, adding “this could mean Facebook paying more tax, and in different places”.

US Treasury Secretary Janet Yellen hailed an “unprecedented commitment” by the G7.

“That global minimum tax would end the race-to-the-bottom in corporate taxation,” she said in a statement after the other G7 nations backed US President Joe Biden’s plan to get tech giants in particular to pay more.

Former Australian finance minister Mathias Cormann, now secretary-general of the Organisation for Economic Co-operation and Development, with Janet Yellen during a bilateral meeting on the sidelines of the G7 finance ministers meeting at Lancaster House in London. Picture: AFP
Former Australian finance minister Mathias Cormann, now secretary-general of the Organisation for Economic Co-operation and Development, with Janet Yellen during a bilateral meeting on the sidelines of the G7 finance ministers meeting at Lancaster House in London. Picture: AFP

The G7 deal was an “historic step” in the fight against fiscal evasion, French Finance Minister Bruno Le Maire said.

“It’s a starting point and in the months ahead we will fight for this minimum tax to be the highest possible,” Mr Le Maire said in a video message on Twitter.

The G7 meeting was attended by ministers from Canada, France, Germany, Italy, Japan and the US.

“I’m delighted to announce that G7 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.

Mr Sunak said the G7 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”.

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 G7 leaders in Cornwall, southwest England, starting on Friday.

US President Joe Biden is set to attend the summit on his first foreign tour since taking office in January.

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.

Mr Biden had called for a unified minimum corporate tax rate of 15 per cent in negotiations with the Organisation for Economic Co-operation and Development and G20.

But Ireland has expressed “significant reservations” about Biden’s plan.

Its 12.5-per cent 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.

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.

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