The Group of Seven rich nations will attempt to bridge long-standing differences on Saturday, June 5, in order to reach a landmark agreement to clamp down on large corporations that they claim do not pay enough taxes.
G7 stated that it would support a minimum global corporation tax rate of at least 15%, and put in place measures to ensure that taxes are paid in the countries where businesses operate.
“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,” British finance minister Rishi Sunak told reporters.
The accord, which could serve as the foundation for a global agreement next month, aims to put an end to a decades-long “race to the bottom” in which countries competed to attract corporate behemoths with ultra-low tax rates and exemptions.
This has cost their public coffers hundreds of billions of dollars, a shortfall they now need to make up as soon as possible to cover the enormous cost of rescuing economies devastated by the coronavirus crisis.
“We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises,” the copy of the final agreement read.
The ministers also agreed to move toward requiring companies to declare their environmental impact in a more standard way, making it easier for investors to decide whether to fund them, which is a key goal for Britain.
For years, rich nations have struggled to find a way to raise more revenue from large multinational corporations such as Google, Amazon, and Facebook, which frequently book profits in jurisdictions where they pay little or no tax.