The G7 agrees to a tax on large multinationals

---

The G7, made up of the world's most developed economies, reached a historic agreement to pay taxes to large multinationals, such as digital giants, in the territories where they obtain their benefits. Economic leaders from the United Kingdom, the United States, France, Germany, Italy, Canada, and Japan supported the reform of the global tax system at the end of a two-day meeting at the Lancaster House palace in central London.

After nearly ten years of trying, the G7 also agreed on a corporate tax rate of at least 15 percent, down from the 21 percent the US was aiming for. The pact reached in London is not yet effective because it has yet to be addressed at the G20 meeting in developed and emerging countries next July in Venice. Furthermore, the definition of large multinational companies has yet to be agreed upon at the global level. The goal of the G7 is for multinationals to pay taxes where they make their profits and not where they have their physical headquarters.

I am delighted to announce that, after years of discussions, the G7 finance ministers have reached a historic agreement to reform the global tax system," Sunak said in a statement posted on his Twitter account. The pact is designed to adapt it to the "global digital age" and "ensure that it is fair so that the right companies (by the tech giants) pay the right tax in the right place, added the Economy Minister.

This is something that has been talked about for at least ten years. And here, for the first time, we have reached an agreement of tangible principles on how these reforms should be and that is great progress, added Sunak, who described the system as fair. The reform may affect technology giants such as Apple, Google, and Facebook since until now large companies can establish headquarters in countries with a relatively low rate of companies and declare taxes on their profits there, even if these were due to large sales made in other places.

Following the meeting, French Finance Minister Bruno Le Maire tweeted that the G7 countries responded to the challenge at this historic moment by agreeing on the main principles for a new international tax system. France can be proud to have led this fight for more than four years. This agreement will make it possible to pay taxes to the digital giants and, for the first time, to implement a minimum corporate tax, added the French minister. We have shown that the G7 powers can establish international rules for the 21st century.

This common position clears the way for a global agreement in Venice in July. For his part, the German Finance Minister, Olaf Scholz, pointed out that this is "very good news" about tax justice and "bad news for tax havens.

A spokeswoman for the UK Treasury Department pointed out that it is a two-pillar agreement that responds to the fiscal challenges arising from a digital and global economy. Under pillar one of this historic agreement, the largest and most profitable multinationals will be required to pay taxes in the countries in which they operate, not just where they are based. Under pillar two, the G7 also agreed on the principle of setting a partnership rate of at least 15 percent.

The G7 tax reform agreement can help governments raise billions of dollars to deal with their heavy debts stemming from the economic crisis triggered by the Covid-19 pandemic. The G7 also pledged to support the world's poorest and most vulnerable countries to address the health and economic challenges associated with the pandemic. In addition, they highlighted the need to support a green global financial system so that financial decisions are made with climate considerations in mind.