Richest G7 countries reach agreement on taxing multinational corporations

(Patria) - Finance ministers of the world's richest countries (G7) have reached an agreement to close cross-border tax loopholes used by some of the world's largest companies. The Group of Seven announced that it will support a global minimum corporate tax rate of at least 15 percent and will establish measures to ensure taxes are paid in the countries where companies operate.

British Finance Minister Rishi Sunak said that after years of discussions, G7 finance ministers have reached a historic agreement to reform the global tax system to adapt to the global digital age.

The agreement, which is expected to form the basis of a global pact next month, aims to end a decades-long "race to the bottom" in which countries competed to attract corporate giants with extremely low tax rates.

This, in turn, has cost their public coffers hundreds of billions of dollars - a deficit that should now be made up as soon as possible to get rid of the huge costs of supporting economies devastated by the coronavirus crisis.

According to a copy of the final agreement seen by Reuters, G7 finance ministers stated that they will "commit to a global minimum tax of at least 15 percent for each country individually".

"We commit to reaching a fair solution for the allocation of taxing rights, with market countries being allocated taxing rights on at least 20 percent of profit exceeding the 10 percent margin for the largest and most profitable multinational enterprises," the text states.

Ministers also agreed to move towards companies reporting their environmental impact in a more standardized way so that investors can more easily decide whether to finance them, which is a key goal of the UK.

Rich countries have struggled for years to agree on how to collect more revenue from large multinational companies such as Google, Amazon, and Facebook, which often book profits in jurisdictions where they pay little or no tax.

The administration of US President Joe Biden gave impetus to the negotiations by proposing a global minimum corporate tax rate of 15 percent, above the level in countries like Ireland, but below the lowest level in the G7.

The Group of Seven, the world's richest countries, consists of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.