Rishi Sunak Announces G7 “Historic Deal” on Tax Reform | G7

The G7 group of rich countries signed a landmark agreement to tackle tax abuse by some of the world’s largest multinationals and establish a global minimum corporate tax for the first time.

Finance ministers from the world’s richest economies agreed to the landmark deal on Saturday in talks held in London, British Chancellor Rishi Sunak said.

As part of the plan, finance ministers also accepted the principle of a global minimum rate ensuring that multinationals pay a tax of at least 15% in each country in which they operate.

US President Joe Biden initially proposed a minimum tax rate of 21%, but was persuaded to dilute the plan to 15% to make it acceptable to a wider group of countries. Critics said the G7 let multinationals get away with a tax rate that didn’t stop tax havens from undermining countries that set higher rates to pay for the extra costs incurred during the pandemic .

Sunak said: “These seismic tax reforms are something the UK has demanded and a huge price for the UK taxpayer – creating a fairer and 21st century tax system.

“This is a truly historic agreement and I am proud that the G7 has shown collective leadership at this crucial time in our global economic recovery.

He said countries had separately committed to follow the UK’s lead in making climate reporting mandatory and agreed to “measures to crack down on the proceeds of environmental crimes.”

The deal, which reverses decades of beggar-for-your-neighbor politics, targets multinationals that have played one country against another to lower the level of tax they pay.

Hosted by the British Chancellor, the summit of finance ministers is expected to give more details on the framework of a program that will force the world’s largest companies to pay more taxes in the countries where they do business as well as in those where they have their seat.

Digital companies such as Amazon, Google and Facebook, which have built huge businesses across the globe while reporting relatively low profits in each country, will also be included in the deal.

Nick Clegg, Facebook’s vice president for global affairs, said the social media giant recognized that the tax reform agreed by G7 finance ministers could mean he pays “more taxes”, but that he wanted the process to be successful.

G7 leaders hope the deal will be approved by the G20 group of countries, which includes China, Russia, South Africa and Saudi Arabia, later in the year.

More than 130 countries are participating in a parallel exercise to agree on a global tax framework under an agreement put in place by the Paris-based Organization for Economic Co-operation and Development (OECD), which is expected to follow the example established by the G7 at meetings in October.

Humanitarian charities have said governments have allowed companies to evade tax payments for too long, denying treasuries the funds needed to deal with health crises, such as the Covid-19 pandemic.

Obstacles to a deal remain, particularly in the United States, where the deal must be passed by both houses of Congress.

Janet Yellen, US Treasury Secretary, told a press conference: “We need stable tax systems that generate sufficient income to invest in critical public goods and respond to crises.

“For too long there has been a race to the bottom in corporate tax rates, where countries compete by lowering their tax rates instead of the well-being of their citizens and their natural environment. “

In a rebuke to Republicans who argue that the United States is ceding sovereignty over tax matters, she said: “By working with each other on the global minimum tax, governments are protecting their national sovereignty to shape tax policy. because the pressures that forced the race to the bottom in corporate tax rates are eased.

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About Natalee Broderick

Natalee Broderick

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