Economy & Politics

G7 agrees on minimum global tax

G7 finance ministers agreed on the taxation of multinational companies on Saturday. An “unprecedented” agreement, hailed among others by Pierre Gramegna, Luxembourg Minister.

G7 finance ministers agreed on the taxation of multinational companies on Saturday. An “unprecedented” agreement, hailed among others by Pierre Gramegna, Luxembourg Minister.

(AFP) – If environmental protection, aid to developing countries and vaccines were on the menu of the G7 Finance, the global minimum tax was the dish of resistance. The finance ministers of the seven great powers also announced on Saturday that they had reached an “unprecedented” agreement on the taxation of multinationals, particularly the digital giants.

Britain's Health Secretary Matt Hancock prepares to welcome his G7 counterparts to Mansfield College at Oxford University, Oxford, England on June 3, 2021, as G7 health ministers convene for a two-day event ahead of the G7 leaders' summit which is to be held in mid-June. - Attendees are due to discuss the issues of global health security, antimicrobial resistance, clinical trials, and digital health. (Photo by Stefan Rousseau / POOL / AFP)

Revived by the administration of US President Joe Biden, this “pillar” of a vast tax reform carried by the OECD is on the program of the meeting of the seven finance ministers on Friday. It is decried by some European countries.

The G7 is committed to the goal of a global corporate tax rate of “at least 15%”, according to their joint statement. Which also mentions the commitment to a fair distribution of rights to tax the profits of multinationals. This agreement of the group of seven great powers was described as “historic” by Rishi Sunak, British Minister of Finance who chaired the meeting as the host country of the G7.

The United Kingdom, France, Italy, Canada, Japan, Germany, and the United States want to achieve an ambitious reform in the spirit of the work undertaken within the OECD. This targets large tech companies that pay ridiculous taxes despite huge profits, by locating in countries where the corporate tax rate is very low, if not zero. Targeted by the reform, the American giant of social networks Facebook assured to want its “success”, even if this implies that it “pays more taxes and in different places”, reacted on Twitter its director of public affairs Nick Clegg .

A starting point

The G7 countries want to put an end to the competition which has led to a drastic fall in tax revenues from companies since the mid-1980s. A politically untenable situation at a time when the state coffers have been emptied by the pandemic while conversely, the digital giants are posting huge profits.

If the reform project is unanimously welcomed, the level of the proposed rate is debated. “This is a starting point and in the coming months we will fight for this minimum tax rate to be as high as possible”, reacted the French Minister of Finance Bruno Le Maire. For his part, his Luxembourg counterpart, Pierre Gramegna (DP) welcomed this agreement which, according to him, should lead to “a fairer tax framework for very profitable multinationals”.

On the other hand, for Gabriela Bucher, of the NGO Oxfam, a minimum rate of 15% is “far too low” if we want to fight against “recourse to tax havens”. The Attac association estimates that “the benefit to be expected from this measure is marginal in the short term” and that a rate at 25% “would have constituted a major advance”. Conversely, for a country like Ireland, which has made its low corporate tax rate (12.5%) a comparative advantage, it is too high.


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