Finance ministers from the Group of Seven (G-7) advanced nations agreed on Saturday to back a minimum global corporate tax rate of at least 15%. U.S. Treasury Secretary Janet Yellen said such a global minimum rate would end “the race-to-the-bottom in corporate taxation” and “ensure fairness for the middle class and working people in the U.S. and around the world.”
Governments in major economies have for years faced the challenge of taxing large companies, such as tech giants Facebook and Google, that operate across many jurisdictions. A common practice among many multinational companies is to declare income — such as those from intangible sources like software and patents — in low-tax jurisdictions regardless of where the sales are made. That allows the companies to avoid paying higher taxes in their home countries.
The G-7 agreement feeds into a broader global effort to update tax rules around the world and will be discussed further at a Group of Twenty (G-20) meeting next month. The Organisation for Economic Co-operation and Development or OECD, an intergovernmental group, has been facilitating negotiations on global taxation over the last few years. It expected a global corporate minimum tax rate would make up the bulk of the $50 billion to $80 billion in additional taxes that companies will end up paying, reported Reuters.