June 21, 2021

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The G7 supports Biden’s transformation of the global tax system

G7 Finance Ministers from Canada, France, Germany, Italy, Japan, UK and US – UK Finance Minister Rishi Sunak announced the deal in a video posted on Twitter on Saturday “A historic agreement has been reached to reform the global tax system to suit the global digital age, and most importantly, make sure it is fair so that the right companies pay the right taxes in the right places.”

The agreement was reached during a G7 meeting of finance ministers in London attended by US Treasury Secretary Janet Yellen, where he called for support for the administration’s efforts to rewrite international tax rules and encourage US companies to book revenue overseas.

Yellen said on Saturday that the deal was a “rich, unprecedented commitment” aimed at preventing companies from evading taxes from the world’s richest economies by diverting profits overseas.

“The G7 finance ministers have made a significant, unprecedented commitment today, which will give them tremendous momentum to achieve a strong global minimum tax rate of at least 15%,” Yellen wrote in the statement.

“That global minimum tax will end up below and below corporate taxation, and will ensure fairness for the middle class and working people in the United States and around the world,” he said, adding that the tax “is as positive as the domain for businesses and the training and training of our crews and investment in research and development and infrastructure. Encouraging countries to compete on platforms. “

Forming a consensus

The deal marks a significant victory for the Biden administration ahead of next week’s G7 leaders’ summit in Cornwall, demonstrating its initial ability to build consensus within the group.

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Under Yellen’s leadership, the United States was more difficult to reach such an agreement than the G7. Although it is separate from the 15% U.S. corporate minimum tax proposed by Biden as part of the current infrastructure negotiations, officials see it as an important part of his broader tax agenda.

Biden’s plan to pay at least $ 4.14 billion in new infrastructure spending is largely in support of a global minimum tax on companies that increase payments to the Treasury.

Establishing a minimum rate will encourage companies to shift their profits to lower tax-paying countries.

The agreement on Saturday will help speed up parallel tax negotiations between about 140 countries led by the Organization for Economic Co-operation and Development.

Ireland, a country that has successfully recruited global companies – including major US technology companies – by offering a corporate tax rate of just 12.5%, has expressed significant reservations over the Biden program.