British Treasury Chancellor Rishi Sunak (left), US Treasury Secretary Janet Yellen, IMF Managing Director Kristalina Georgieva and Canadian Finance Minister Christa Freeland chat on the first day of a meeting of a group of seven finance ministers at Lancaster House in London. June 4, 2021
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“Today, after years of discussions, the G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age – and it is crucial to ensure that it is fair so that the right companies to pay the right tax in the right places, “British Finance Minister Rishi Sunak said in a video statement on Saturday.
Under the agreement, the G-7 countries will support a global minimum corporate tax of at least 15%, Sunak said in a series of tweets. The reforms will affect the world’s largest companies with profit margins of at least 10%.
If finalized, this would represent a significant development in global taxation. G7 members include Canada, France, Germany, Italy, Japan, the United Kingdom and the United States
US Treasury Secretary Janet Yellen, who is in London for the face-to-face meeting, hailed the move as significant and unprecedented.
“This global minimum tax will put an end to the race to the bottom in corporate taxation and provide justice for the middle class and working people in the United States and around the world,” she wrote on Twitter.
President Joe Biden and his administration initially proposed a minimum global tax rate of 21% in a bid to end the race to the bottom among various countries in luring international business. However, after difficult negotiations, a compromise of over 15% was reached.
A global deal in this area would be good news for countries with money trying to rebuild their economies after the coronavirus crisis.
But Biden’s idea was not received with the same level of excitement around the world. The United Kingdom, for example, did not immediately express its support for the proposal.
US President Joe Biden spoke during a meeting with a bipartisan group of members of Congress.
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The issue can also be controversial in the European Union, where different Member States impose different corporate tax rates and can attract large companies. For example, Ireland’s tax rate is 12.5%, while France can reach 31%.
Speaking in April, Irish Finance Minister Paschal Donohou said that smaller countries should be allowed to have lower tax rates because they do not have the same capacity to scale as large economies, according to the British Guardian newspaper. “.
The world’s most powerful economies have been at odds with taxation for some time, especially after the digital giant’s additional tax plans. During Donald Trump’s presidency, the United States vehemently opposed digital tax initiatives in various countries and threatened to impose trade tariffs.