Historic agreement between the finance ministers of the G7 countries for the creation of a global minimum tax rate on companies of at least 15%. The agreement should form the basis of a comprehensive agreement. The intent is to end what US Treasury Secretary Janet Yellen called a “30-year race to the bottom of corporate taxation with countries competing to attract multinational corporations.
The adoption of a minimum global rate of 15% on business profits is aimed at combating tax havens and eliminating the need for ad hoc taxation for web giants. The intent is therefore to discourage multinationals from shifting profits to low-tax countries, regardless of where their sales are made.
“The chances of a global deal have greatly increased. Now we have to go the last mile to expand this consensus to all G20 members and to all countries involved in the OECD inclusive framework, ”said EU economy commissioner Paolo Gentiloni.
But how would the global minimum tax rate work? First of all it would only apply to overseas profits. Therefore governments could still set any local corporate tax rate, but if companies pay lower rates in a particular country, their national governments could “top up” taxes to the minimum rate, eliminating the benefit of shifting profits. .
There is a mechanism to force Big Tech to pay taxes where it records sales.