Finance ministers from UK, France, Italy, Japan, Canada, Germany and US met in London to discuss White House plan for a floor tariff international. The deal ends transatlantic tensions that have undermined years of negotiations between some 140 countries on modernizing outdated tax rules. The deal also paves the way for a broader deal between G20 countries next month.
The aim of the agreement is to prevent large companies from transferring their profits to avoid tax evasion, for example through letterbox companies. Companies have to pay more taxes in the countries where they operate.
“I am pleased to report that after years of discussions, G7 finance ministers have reached a historic agreement to reform the global tax system,” UK Finance Minister Rishi Sunak said in a statement.
The reform will make the system fit for the global digital age. He also called the deal crucial in ensuring that “the right companies pay the right taxes in the right place”.
According to her compatriot Janet Yellen, a global minimum tax could put an end to the “race to the bottom” of corporate taxes. She also says the deal will do justice to the middle class and working people in the United States and around the world.
French Finance Minister Bruno Le Maire said the plan also covers digital taxes and guarantees a minimum rate of at least 15%. And G7 countries will seek G20 support, starting with next month’s meeting in Venice.
The G7 had previously indicated that many technical details still had to be decided in the coming weeks. A breakthrough was already made on Friday on how tax revenues are distributed to tech companies.
The G7 also agreed on the principle of an overall minimum corporate tax rate for large companies of at least 15%. The measures will also help to eliminate tax evasion. This has always proved difficult until now, as the United States did not want to differentiate between digital companies and others in the new rules. However, there was a desire for Europe to deal openly with tech companies. A final deal may not be reached until this fall, in part because some states must first pass national laws.
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