Advanced economies making up the G7 grouping have reached a “historic” deal on taxing multinational companies. The deal announced involving the US, the UK, Germany, France, Canada, Italy, and Japan, is likely to be put before a G20 meeting in July.
- The first decision that has been ratified is to force multinationals to pay taxes where they operate so as to counter tax avoidance.
- The second decision in the agreement commits states to a global minimum corporate tax rate of 15% to counter the possibility of countries undercutting each other to attract investments.
- The decision to ratify a 15% floor rate follows from a declaration of war on low-tax jurisdictions around the globe announced by US Treasury Secretary Janet Yellen in April 2021, who had urged the world’s 20 advanced nations to move in the direction of adopting a minimum global corporate income tax in April.
- She that the move to put a minimum rate in place attempted to reverse a “30-year race to the bottom” in which countries have resorted to slashing corporate tax rates to attract multinational corporations.
- The US proposal had proposed a higher 21 percent minimum corporate tax rate, coupled with canceling exemptions on income from countries that do not legislate a minimum tax to discourage the shifting of multinational operations and profits overseas.