The G7, a group of seven major economies, wants a minimum corporate tax rate of 15 percent worldwide. The G7 finance ministers reached an agreement on this at a meeting in London.
US President Biden recently proposed a global consolidation of tax rates. This deal is its effect. The G7 covers Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
In other parts of the world
The plan is to discuss the minimum rate further at the G7 summit of government leaders next weekend. To get to the rest of the world after the G7, it must also come to the G20 summit later this year. The Organization for Economic Co-operation and Development (OECD), of which 36 countries are members, must also agree.
If such a global rate is introduced, it will be much harder for companies to avoid taxes through tax havens. This could generate billions in additional tax revenue worldwide. “After many years of discussions, we have reached a historic agreement to transform the global tax system into the global digital age,” said Sunak, President of the United Kingdom. The plan is expected to force tech companies such as Facebook and Google to pay higher taxes.
The G7 countries already have a tax rate of 15 percent or more for companies. But some EU countries are now below that, with Hungary at 9 per cent, Ireland and Cyprus at 12.5 per cent. Cypriot Finance Minister Petraeus recently said he believes tax rates should be the personal choice of countries. It remains to be seen whether the EU will unanimously support this plan.