As the G7 nations reach a landmark agreement, Apple, Google, Amazon, and other tech giants may face far higher taxes
The United States, the United Kingdom, and other major nations signed a historic agreement to pursue increased worldwide taxation on transnational corporations such as Google, Apple, and Amazon. The Group of Seven large advanced economies decided to support a minimum global corporate rate of at least 15% and for firms to pay more tax in the countries where they sell goods and services, potentially raising hundreds of billions of dollars to assist them to cope with the fallout of COVID-19.
“After a two-day meeting in London, G7 finance ministers have reached a historic agreement to overhaul the global tax system to make it suitable for the global digital era,” British finance minister Rishi Sunak said.
The “major, unprecedented commitment,” according to US Treasury Secretary Janet Yellen, will put an end to a “race to the bottom” on global taxation.
The deal, which has been in the works for years, also promises to eliminate national digital services tariffs imposed by the United Kingdom and other European countries, which the US claims unjustly target US tech firms.
The measures, though, will need to get broader support at a G20 conference next month in Venice, which will include a number of emerging economies.
“It’s complicated, and this is just the beginning,” Sunak explained.
The ministers also agreed to take steps toward requiring corporations to report their environmental effects in a more uniform manner so that investors may more easily determine whether or not to support them, which is a key priority for the UK.
For years, wealthy countries have struggled to agree on a means to generate more income from huge multinational corporations like Google, Amazon, and Facebook, which commonly book profits in jurisdictions where they pay little or no tax.
The administration of US President Joe Biden injected new life into the stalled discussions by suggesting a minimum global company tax rate of 15%, which is higher than the rate in Ireland but lower than the lowest in the G7.
Germany and France praised the deal, while French Finance Minister Bruno Le Maire said he would seek a higher global minimum corporate tax rate than 15%, which he called a “beginning point.”
The pact, according to German Finance Minister Olaf Scholz, is “bad news for tax havens all around the world.”
“Companies will no longer be able to avoid paying taxes by booking earnings in nations with the lowest tax rates,” he continued.
Paschal Donohoe, the finance minister of Ireland, whose country stands to lose a lot of money due to its 12.5 percent tax rate, said any global agreement must also consider smaller countries.
Sunak called the agreement a “great reward” for taxpayers, but said it was too early to estimate how much money it will bring in for the UK.
The agreement does not specify which organizations will be subject to the requirements, merely stating that “the largest and most profitable international corporations” will be affected.
European countries have been concerned that a company like Amazon, which has smaller profit margins than most other well-known technology businesses, could slip through the cracks.