Tuesday, 28 September, 2021

Rishi Sunak hails 'historic' G7 Global Tax Agreement

Britain's Chancellor of the Exchequer Rishi Sunak left meets with Japanese Deputy Prime Minister and Finance Minister Taro France, Germany, Italy, Spain on verge of G7 deal to tax multinationals
Adrian Cunningham | 05 June, 2021, 23:34

Finance ministers from wealthy G7 nations on Friday moved towards supporting US-backed plans for a minimum global level of corporate tax aimed at getting multinationals - especially tech giants - to pay more into government coffers hit hard by the pandemic.

"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", said British finance minister Rishi Sunak.

Leaders of the seven countries will hold their annual meetings June 11-13 in Carbis Bay, Cornwall, at England's southwestern tip.

Finance ministers meeting in London agreed to battle tax avoidance through measures to make companies pay in the countries where they do business.

Regarding the commitment on taxation, Britain's Treasury noted that "the largest and most profitable multinationals will be required to pay tax in the countries where they operate - and not just where they have their headquarters".

A particular focus of the minimum tax rate are the big global tech firms like Amazon, Facebook and Google parent Alphabet, which are adept at exploiting the differences in varying corporate tax codes.

The Treasury said it addresses the tax challenges arising "from an increasingly globalised and digital global economy".

The United States wants an end to the digital services taxes which Britain, France and Italy have levied, and which it views as unfairly targeting USA tech giants for tax practices that European companies also use. It comes just over six months after the United Kingdom led the way by being the first country in the world to commit to do so in November 2020. "And I believe they have high expectations for what we all can agree over the coming days".

Ministers from the US, Japan, France, Canada, Germany and Italy will attend the two-day meeting at Lancaster House in London, with Donohoe attending as President of the Eurogroup.

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To ensure a balanced global economic recovery from virus-induced slumps and equitable COVID-19 vaccine access for developing nations, the advanced nations vowed to "take steps to limit the uneven impact of the crisis by targeting support to where it is needed most", and to encourage the pharmaceutical industry to contribute more.

The thorny topic of the regulation of digital currencies such as bitcoin will also be on the agenda.

"We are just one millimetre away from a historic agreement", French Finance Minister Bruno Le Maire told the BBC, sentiments echoed by German Finance Minister Olaf Scholz.

Biden had called for a unified minimum corporate tax rate of 15 percent in negotiations with the Organisation for Economic Co-operation and Development (OECD) and G20.

The finance ministers from France, Italy, Germany, Spain and elsewhere in London on Friday will also discuss plans for a sweeping 15% global corporation tax that could raise $50bn (£35bn) to $80bn (£56bn) for governments around the world.

Is 15 percent too little? .

Commentators favorable to the Biden plan have written that, by opposing it, Cyprus risks becoming a "pariah state", although they assume Ireland will, in the end, come on board, which is far from certain. Its 12.5-percent 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.

"A rate of 15 percent would in our opinion be largely insufficient", Oxfam France's senior policy officer Quentin Parrinello said.

Britain wants multinationals to pay taxes that reflect their operations, as governments seek to fix finances battered by slashed tax receipts plus vast spending and borrowing during the pandemic.