Group of Seven finance ministers (Canada, France, Germany, Italy, Japan, UK and USA) gathering in London agreed on June 5th to back a global minimum tax of at least 15% on multinational companies. The G7 group also agreed that the biggest companies should pay tax where they generate sales, and not just where they have a physical presence. G7 members also said they were "in favor" of mandatory publication of the financial climate risk of large commercial companies.
British Chancellor of the Exchequer, Rishi Sunak, who chaired the summit and who called the agreement “historic”, said: “During the meeting, Finance Ministers agreed the principles of an ambitious two Pillar global solution to tackle the tax challenges arising from an increasingly globalised and digital global economy.
Under Pillar One of this historic agreement, the largest and most profitable multinationals will be required to pay tax in the countries where they operate – and not just where they have their headquarters. The rules would apply to global firms with at least a 10% profit margin – and would see 20% of any profit above the 10% margin reallocated and then subjected to tax in the countries they operate. (…)
Under Pillar Two, the G7 also agreed to the principle of at least 15% global minimum corporation tax operated on a country by country basis. (…)
Discussions on the two Pillars have been ongoing for many years. The agreement will now be discussed in further detail at the G20 Financial Ministers & Central Bank Governors meeting in July.”
The idea of a global tax was launched by the United States in April. The tax rate on which the members of the G7 have agreed, however, is lower than the rate of 21% initially defended by US President Joe Biden.
Tech giants such as Apple, Facebook and Google might be affected by the agreement. Foreign governments have long complained that large digital companies should pay them more in taxes. Some have recently passed taxes specifically targeting revenue generated by such companies, including those based in the US such as Facebook, Google and Amazon.
Nick Clegg, Facebook's vice president for global affairs, said in a statement the company had "long called for reform of the global tax rules and we welcome the important progress made at the G7."
"We want the international tax reform process to succeed and recognize this could mean Facebook paying more tax, and in different places," Clegg added.
Google said it strongly supported the work done to update international tax rules, and hopes "countries continue to work together to ensure a balanced and durable agreement will be finalized soon," said Google spokesperson, José Castañeda.
For NGOs fighting against tax evasion, the rate is clearly insufficient. Oxfam thus described the agreement as a “discount compromise”. "The rate of 15% is simply too low", considers the organization, which denounced the "lack of ambition" of Europeans in this fight.
For his part, the Luxembourg Minister of Finance, Pierre Gramegna, was enthusiastic about the deal found in London: "Luxembourg welcomes the general agreement reached today by the #G7 on minimal effective taxation(15%)& a fairer tax framework for the very profitable multinationals.Looking forward to contributing to a detailed agreement in @OECD inclusive framework for the ministerial meeting in Oct", he tweeted.
Nations also agree to make climate reporting mandatory and agree measures to crack down on the proceeds of environmental crimes
According to the members of the G7, revealing the financial climate risk of companies is crucial for the energy transition, even if an agreement remains to be found at the global level. The mandatory declarations referred to, which include for example CO2 emissions or investment projects, must relate to all large commercial companies. The objective is to enable them to better assess the financial impact of the climate crisis and to support the green transition of countries that want to be carbon neutral in 2050.
“Finance Ministers accelerated action on environmental issues, by committing for the first time to properly embed climate change and biodiversity loss considerations into economic and financial decision-making.
Six years since the Task Force on Climate-Related Financial Disclosures (TCFD) was created, the UK was instrumental in getting G7 countries to move towards making climate disclosures mandatory across their respective economies. It comes just over six months after the UK led the way by being the first country in the world to commit to do so in November 2020. This is a major step towards ensuring the global financial system plays its part transition to net zero, as investors better understand how firms are managing climate risks and can allocate finance accordingly”, according to Rishi Sunak quoted in the final press release of the G7, adding:
“In support of the UK’s work to foster a nature-positive economy, the Finance Ministers welcomed the imminent launch of a taskforce on nature-related financial disclosures – to mirror the TCFD – and agreed to crack down on the proceeds of environmental crimes by introducing and strengthening central company beneficial ownership registries.”
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Publié le 07 juin 2021