G7 nations strike deal to tax big companies and squeeze havens

Reuters | Washington

The Daily Tribune – www.newsofbahrain.com

The United States, Britain and other leading nations reached a landmark deal yesterday to pursue higher global taxation on multinational businesses such as Google, Facebook, Apple and Amazon. In a move that could raise hundreds of billions of dollars to help governments cope with the aftermath of COVID-19, the Group of Seven (G7) large advanced economies agreed to back a minimum global corporate tax rate of at least 15%. Companies will also have to pay more tax in the countries where they make sales.

“G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age,” British finance minister Rishi Sunak said after chairing a two-day meeting in London. The meeting, hosted at an ornate 19th-century mansion near Buckingham Palace in central London, was the first time finance ministers have met faceto-face since the start of the pandemic. US Treasury Secretary Janet Yellen said the “significant, unprecedented commitment” would end what she called a race to the bottom on global taxation.

German finance minister Olaf Scholz said the deal was “bad news for tax havens around the world”, adding: “Companies will no longer be in a position to dodge their tax obligations by booking their profits in the lowest-tax countries.” Rich nations have struggled for years to agree on a way to raise more revenue from large multinationals, which can pay little tax on the billions of dollars of sales they make in countries around the world, draining public finances.

US President Joe Biden’s administration gave the stalled talks fresh impetus, however, by proposing a minimum global corporation tax rate of 15% to deter companies from booking profits elsewhere. The 15% is above the level in countries such as Ireland but below the lowest level in the G7. Amazon and Google welcomed the agreement and Facebook said it would likely pay more tax.

Nick Clegg, Facebook’s vice-president for global affairs and a former British deputy prime minister, said: “We want the international tax reform process to succeed and recognise this could mean Facebook paying more tax, and in different places.” But some campaign groups condemned what they saw as a lack of ambition.