Ahead of the G-20 summit in the UK later this month, finance ministers from the G-7 are reportedly on the cusp of a deal for a minimum corporate tax rate of “at least 15%”, while differences remain about how megacap tech firms should be taxed. The group will hold a series of virtual and in-person meetings over the weekend where talks will continue.
According to Bloomberg, the ministers are meeting on Friday and Saturday in London, and will likely release a statement over the weekend once they have settled on a mutually-agreeable framework. However, a deal involving just the members of the G-7 won’t amount to much, since developed economies with competitive corporate tax rates (like Ireland) will almost certainly buck any deal put together by the G-7 and/or G-20.
That’s why agreeing on the “at least” wording is so important, since that would leave room for maneuver in talks involving around 140 nations. It would also allow the US some more wiggle room when it comes to its domestic legislation.
Of course, the rate itself is only one part of the broader challenge. The global talks, taking place under the auspices of the OECD, which has been trying to reform global corporate tax for years now, will also focus on the more contentious issue of how to divide up the right to tax the biggest multinationals, like Facebook, Apple and Amazon.
The UK said in a statement Friday that finance ministers held “productive negotiations about reforming the global tax system and tackling the tax challenges that arise in a complex, digital global economy” while French Finance Minister Bruno Le Maire called on the G-7 to support a broad deal on both a digital tax and a minimum tax rate.
A deal would seriously limit the ability of corporations (particularly American tech giants) to save money by moving to low-tax jurisdictions. It follows President Biden’s plans for the biggest tax hikes in decades to finance his two-part, multi-trillion infrastructure packages rolled out in accordance with Biden’s “Build Back Better” slogan, as well as a series of tax-related judgments in European courts.
But whatever deal the G-7 arrives at, it won’t mean much if it doesn’t accommodate Ireland’s minimum corporate tax rate of 12.5%, which is 2.5 percentage points lower than the 15% minimum that both the US and its largest European allies have agreed to.