[ABS
News Service/07.06.2021]
I’m
delighted to announce that today, after years of discussion, G7 finance
ministers have reached a historic agreement to reform the global tax system to
make it fit for the global digital age, but crucially, to make sure that it’s
fair, so that the right companies pay the right tax in the right places. And
that’s a huge prize for British taxpayers. It’s a very proud moment. And I want
to say thank you to my G7 colleagues for their collective leadership and for
their willingness to work together to seize this moment, to reach a historic
agreement that finally brings our global tax system into the 21st century. You
know, it’s complicated. And this is the first step. This is agreement amongst
G7 finance ministers. And next month, we’ll have a G20
finance ministers summit to make further progress. But I think the crucial
thing for people to take away is the principle of fairness. That’s what we’ve
achieved today, to ensure that there’s a level playing field for all types of
companies. And whether it’s people operating in tax
havens or it’s digital companies, we’re going to level the playing field and
inject that principle of fairness into our global tax system.
The top economic officials
from the world’s advanced economies reached a breakthrough on Saturday in their
years long efforts to overhaul international tax laws,
unveiling a broad agreement that aims to stop large multinational companies
from seeking out tax havens and force them to pay more of their income to
governments.
Finance leaders from the
Group of 7 countries agreed to back a
new global minimum tax rate of at least 15 percent that companies
would have to pay regardless of where they locate their headquarters.
The agreement would also
impose an additional tax on some of the largest multinational companies,
potentially forcing technology giants like Amazon, Facebook and Google as well
as other big global businesses to pay taxes to countries based on where their
goods or services are sold, regardless of whether they have a physical presence
in that nation.
Officials described the pact
as a historic agreement that could reshape global commerce and solidify public
finances that have been eroded after more than a year of combating the
coronavirus pandemic. The deal comes after several years of fraught
negotiations and, if enacted, would reverse a race to the bottom on
international tax rates. It would also put to rest a fight between the United
States and Europe over how to tax big technology companies.
Rishi Sunak, Britain’s Chancellor
of the Exchequer, announced the agreement and hailed it as a deal that would
make the global tax system “fit for the global digital age” and would ensure
“the right companies pay the right tax in the right places.”
While the agreement is a
major step forward, many challenges remain. Next month, the Group of 7
countries must sell the concept to finance ministers from the broader Group of
20 nations that are meeting in Italy. If that is successful, officials hope
that a final deal can be signed by Group of 20 leaders when they reconvene in
October.
Garnering wider support will
not be easy. Ireland, which has a tax rate of 12.5 percent, has come out
against the global minimum tax, arguing that it would be disruptive to its
economic model. Some major countries such as China have been quietly tracking
the proceedings but are considered unlikely to buy in. Finance officials
believe that if enough advanced economies sign on, then other countries will be
compelled to follow suit and they plan to exert political pressure on Ireland
to join the agreement.
The Biden administration has
been particularly eager to reach an agreement because a global
minimum tax is closely tied to its plans to raise the corporate tax rate in the
United States to 28 percent from 21 percent to help pay for the president’s
infrastructure proposal.