G7 countries agree to set minimum global corporate tax rate at 15%

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Finance ministers from the Group of Seven (G7) countries reached a landmark agreement on Saturday to introduce a minimum global corporate tax rate of at least 15%.

In a joint statement, G7 finance ministers said the tax rate would be used to target “the largest and most profitable multinational companies”.

US Treasury Secretary Janet Yellen said at a press conference that this would apply to Amazon and Facebook.

“It will include big profitable companies, and those companies, I think, will qualify by almost any definition,” she said.

Yellen added that the deal “would end the race to the bottom in corporate taxation and ensure fairness for the middle class and working people in the United States and around the world.”

“The global minimum tax would also help the global economy to prosper, by leveling the playing field for business and encouraging countries to compete on positive bases, such as educating and training our workforce and investment in research, development and infrastructure. minimum tax can help finance investments in these critical priorities, ”she said.

“Finally, by working with each other on the global minimum tax, governments are protecting their national sovereignty in setting tax policy, because the pressures that forced the race to the bottom in corporate tax rates are eased. ”

Facebook vice president of global affairs Nick Clegg took to Twitter to greet the announcement.

“Facebook has long called for reform of global tax rules and we welcome the significant progress made in the G7. Today’s agreement is an important first step towards certainty for businesses and building public confidence in the global tax system, ”he wrote in a statement. Tweeter.

“We want the international tax reform process to be successful and recognize that this could mean Facebook is paying more taxes, and in different places.”

Canada, France, Germany, Italy, Japan, United Kingdom and United States constitute the G7 countries.

The work of the G7 finance ministers is part of a larger, worldwide effort to prevent multinationals from shifting their profits overseas to avoid paying taxes.

In April, US President Joe Biden outlined his plans for corporate tax reform, promising that the tax rate in the United States would drop from 21% to 28%. A week later, Yellen said the United States would work with other G20 countries to set a minimum corporate tax rate.

Last October, the OECD published reports on a “two-pillar approach” to ensure that multinationals pay their fair share of taxes in the countries where they operate.

The two-pillar approach is to link and distribute profits and ensure a minimum level of taxation.

The OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) brings together 137 member jurisdictions. It says the two pillars combined could increase global corporate income tax revenues by around $ 50 billion to $ 80 billion per year.

G20 finance ministers said they were determined to continue progress on both pillars and urged the Inclusive Framework to address the remaining issues with a view to reaching a comprehensive and consensual solution by mid-2021.

As part of the next steps, G7 finance ministers have said they will meet with G20 finance ministers and central bank governors next month to see if his deal can gain broader support from the G20. other countries.

“We agree on the importance of advancing the agreement in parallel on the two pillars and look forward to reaching an agreement at the July meeting,” said G7 finance ministers.

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