The Group of Seven wealthy nations has committed to moving toward a 15% global minimum tax on corporations that operate internationally, handing the Biden administration a win.
Treasury Secretary Janet Yellen announced the agreement on Saturday and hailed it as an “unprecedented commitment” that would “end the race-to-the-bottom in corporate taxation.” The announcement came after the top finance chiefs for each of the countries met in London.
“The global minimum tax would also help the global economy thrive, by leveling the playing field for businesses and encouraging countries to compete on positive bases, such as educating and training our workforces and investing in research and development and infrastructure,” Yellen said.
The G-7 features some of the world’s largest economies and includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The group said in a joint statement that it strongly supports efforts to “address the tax challenges arising from globalization and the digitalization of the economy and to adopt a global minimum tax.”
BIDEN PITCHES GOP ON 15% MINIMUM CORPORATE TAX RATE IN INFRASTRUCTURE PACKAGE
The G-7 statement added that the countries 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 news comes after the U.S. announced last month that 15% would be the floor for negotiations about a global minimum tax with other countries. The 15% tax was first pitched to negotiators from two dozen countries that are part of the Organization for Economic Co-operation and Development and was a lower number than anticipated.
After the May OECD meeting, the administration said that U.S. representatives who attended the tax negotiations underscored to the others “that discussions should continue to be ambitious and push that rate higher.”
The proposed 15% rate agreed to by the G-7 is still higher than the corporate tax rate of some countries, including Ireland, which has a 12.5% rate. Hungary, which has a corporate income tax rate of only 9%, has already balked at the notion of a global minimum tax.
Many details of the plan still need to be sorted out, and the Group of 20, which includes economic powerhouses such as China and India, would need to throw its weight behind the effort in order to have the 15% effective globally.
Italian Finance Minister Daniele Franco said he wants to broaden the discussion about the 15% rate when G-20 finance ministers meet in July in his country, according to Bloomberg.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Companies in the U.S. pay a 21% corporate tax rate. The Biden administration has proposed raising the 21% domestic rate to 28% as a way to pay for a $2.3 trillion infrastructure package, although President Joe Biden recently pitched to Republicans a pared-down infrastructure package that would leave the 21% rate intact. The administration has said, though, that it would still seek to increase the rate in separate legislation.
