June 12, 2021

G7 Finance takes historic step towards global tax reform

It is a giant step towards the establishment of a global minimum tax rate of at least 15% of the largest multinationals and, more broadly, of a tax system tailored for the XXIe century, adapted to globalization and digital technology. Saturday June 5, at the end of a forty-eight hour negotiating session, the finance ministers of seven of the greatest economic powers on the planet – United States, United Kingdom, Canada, Germany, France, Italy and Japan – witnessed their “Strong support” has a “World minimum tax” as well as an allowance “Fair”, between the countries of the North and those of the South, “Duties to be taxed” the profits of very large companies.

“We express our strong support for the ongoing efforts, undertaken through the Inclusive Framework of the G20 / OECD, to address the tax challenges arising from the globalization and digitization of the economy and to adopt a global minimum tax”, indicates the final press release of the G7 finances. Who adds: “We are also committed to establishing a global minimum tax of at least 15%, applied country by country. “

Read also the editorial: Taxation of multinationals, finally taxing digital

The member countries of the G7 are also clarifying their position regarding the way in which a share of the profits of the so-called surplus or residual multinationals – in other words, beyond a certain level of profitability – could be reallocated to the countries in which these groups own their markets and customers, without having a head office or establishment: “We are committed to reaching a fair solution on the distribution of taxing rights, with market countries being granted taxing rights on at least 20% of profits exceeding a 10% margin for the most multinational companies. large and most profitable “, adds this document. Certain exceptions qualified as“Appropriate” should be confirmed later, like the extractive mining industries, which are complicated to understand.

Multilateralism rediscovered

By speaking with a common voice, the G7 Finance is providing significant political support to the global tax reform project, supported for two years by the Organization for Economic Co-operation and Development (OECD) and built on two pillars. The compromise reached in London is not only symbolic of a rediscovered multilateralism, after the breakdown of the Trump years. It represents the promise of a broader agreement at the G20 finance summit on July 9 and 10, in Venice, where the future of this reform will really be played out. The finalization of the project will have been previously discussed, on June 30 and 1is July, by the Inclusive Framework of the OECD, a training which brings together 139 rich and emerging countries.

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