On Saturday, G7 finance ministers concluded a landmark agreement – “to reform the global tax system and adapt it to the global digital age,” as outlined by British Minister Rishi Sunak. They agreed to create a fee floor for companies around the world.
With this, the possibility of taxing multinational corporations, especially American tech giants, increases. The idea is to prevent these companies from seeking tax havens and make them pay more taxes in the countries in which they operate.
Under the deal, hundreds of billions of dollars could flow into the coffers of governments that have lost money due to the COVID-19 pandemic. The minimum global corporate tax rate will be at least 15%.
The agreement comes after eight years of negotiations that gained new momentum in recent months after proposals from the government of US President Joe Biden.
The meeting, which took place in a 19th-century mansion near Buckingham Palace, was the first time finance ministers had met in person since the start of the pandemic.
US Treasury Secretary Janet Yellen said a “significant and unprecedented commitment” would end what she called a race to liberalize global taxes.
German Finance Minister Olaf Schulz said the deal was “bad news for tax havens around the world”.
Janet also saw the G7 meeting as a return to multilateralism under Biden and in contrast to US President Donald Trump’s approach that alienated many US allies.
“What I’ve seen during my time in this G7 is deep cooperation and a desire to coordinate and address a much broader range of global issues,” she said.
Ministers also agreed that companies would advertise their environmental impact in a more standardized way so that investors could more easily decide whether to fund it, a key goal for the UK.
The Group of Seven includes the United States, Japan, Germany, Great Britain, France, Italy and Canada.