Biden Boost As G7 Finance Ministers Reach Global Tax Agreement

The Group of Seven (G7) consisting of the world's richest countries has reached a long-anticipated agreement on a corporate tax rate at a meeting of finance ministers in London on Saturday.

The G7 nations have said they will support a 15 percent minimum corporate tax and will take measures to make sure that businesses pay tax where they operate in an effort to close cross-border tax loopholes.

The decision appears to represent a significant victory for President Joe Biden, whose administration is pushing a plan to make major changes to the international system of taxation. Biden will attend the G7 summit in the U.K. next week.

British finance minister Rishi Sunak told journalists on Saturday: "After years of discussion, G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age."

The Biden administration had introduced suspended tariffs of 25 percent on Wednesday against six countries - Austria, India, Italy, Spain, Turkey, and the U.K. - in response to digital services taxes introduced by those nations targeting large U.S. tech companies.

The tariffs would apply to some $2 billion of goods but their implementation has been delayed for up to 180 days in the hope that an agreement could be reached on a global tax regime through the Organization for Economic Co-operation and Development (OECD) and the G20, according to CNN. Biden is seeking a unified minimum rate of 15 percent.

Several countries have long complained that major tech firms, such as Facebook, Amazon, and Google, have not been paying their governments enough in tax and some have taken steps to correct this.

The agreement at the G7 finance ministers meeting in London on Saturday may prove a boost to Biden's plan for a major reform of global taxes. The measures approved could form a basis for an international pact.

According to Reuters, the finance ministers' final agreement sees the nations "commit to a global minimum tax of at least 15% on a country by country basis."

"We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises," the text says.

The move may bring the rich nations closer to tackling the long-running difficulty of making major multinational companies pay what their governments consider adequate levels of tax.

Some governments had successfully brought international corporations into their countries by keeping corporate tax lower, cutting it, or offering exemptions in what has been described as a "race to the bottom".

Firms have booked their profits through lower tax jurisdictions, costing governments hundreds of billions of dollars in potential revenue. The cost of the COVID-19 pandemic and Biden's ambitious spending plans added new impetus to the efforts at reform.

"With the global corporate minimum tax functionally set at zero today, there has been a race to the bottom on corporate taxes, undermining the United States' and other countries' ability to raise the revenue needed to make critical investments," Treasury Secretary Janet Yellen said in a statement on May 20.

The 15 percent minimum tax is lower than any of the current corporate tax rates in the G7 nations but higher than in countries like Ireland, where the rate is 12.5 percent, or Hungary, where it is 9 percent. A push toward a global agreement on the matter will be a major cause of concern in Dublin, Budapest, and elsewhere.

Irish finance minister Paschal Donohoe attended the Saturday meeting in his capacity as president of the Eurogroup of 19 countries that use the euro. He expressed "significant reservations" about Biden's plan.

Newsweek has asked the White House for comment.

Joe Biden Speaks at the Tulsa Commemoration
U.S. President Joe Biden speaks at a rally during commemorations of the 100th anniversary of the Tulsa Race Massacre on June 01, 2021 in Tulsa, Oklahoma. Biden wants a major reform of the global tax system. Brandon Bell/Getty Images