Rich nations 'near deal' on corporate tax pact

Rich nations 'near deal' on corporate tax pact

Rich nations 'near deal' on corporate tax pact

Finance ministers from across the G7 nations meet at Lancaster House in London, UK, June 5, 2021.

Finance ministers from the Group of Seven industrialized nations agreed Saturday on a global minimum corporate tax rate of at least 15 percent to keep multinationals from shifting profits overseas, paving the way for a more inclusive consensus involving over 100 economies.

At the moment companies can set up local branches in countries that have relatively low corporate tax rates and declare profits there.

Under Pillar One of this historic agreement, 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.

He thanked his counterparts for striking "a deal of historic significance that finally brings our global tax system into the 21st century".

The move could see billions of dollars flow to governments to pay off debts incurred during the Covid crisis.

Facebook was quick to respond and struck a conciliatory tone.

"It's about time that some of the world's most powerful economies force multinational corporations, including tech and pharma giants, to pay their fair share of tax", said Gabriela Bucher, executive director of Oxfam International.

This is a major step towards ensuring the global financial system plays its part transition to net zero, as investors better understand how firms are managing climate risks and can allocate finance accordingly.

"Facebook has long called for reform of the global tax rules and we welcome the important progress made at the G7".

Outcomes of the finance chiefs' talks will be discussed at a face-to-face summit of the G-7 leaders scheduled for three days from June 11 in Cornwall, southwestern Britain.

Cyprus has joined Ireland in opposing US President Joe Biden's idea of a global minimum corporate tax.

Momentum is growing behind the US-led plans to limit the ability of multinationals like tech giants to game the system to boost profits, especially at a time when economies around the world are reeling from the impact of the coronavirus pandemic.

German finance minister Olaf Scholz told reporters it was the "right time" for a global tax deal given the vast sums spent by governments "to protect citizens, stabilise the economy and save jobs" since a year ago.

Le Maire said this represented "only a starting point".

However, the battle for low-tax countries is less likely to be about scuppering the overall talks and more about building support for a minimum rate as close as possible to its 12.5% or seeking certain exemptions.

Ireland has expressed "significant reservations" about Biden's plan, however.

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

Proponents argue that a minimum tax is necessary to stem competition between countries over who can offer multinationals the lowest rate.

They say that a "race to the bottom" saps precious revenues that could go to government priorities like hospitals and schools.

"We will provide for appropriate coordination between the application of the new global tax rules and the removal of all Digital Services Taxes, and other relevant similar measures, on all companies".

Corporation tax in the United Kingdom is set to go well beyond 21%, however, after the Chancellor announced in the March Budget that the tax on company profits would rise from 19% to 25% by 2023 as part of efforts to rebuild the public finances following record Government borrowing during the pandemic.

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