Historic Global Tax Deal Nears as G-7 Seeks Agreement on Tech

The Facebook Inc. app is displayed on a Apple Inc. smartphone near Le Sacre Coeur basilica in this arranged photograph in Paris, France. (Photographer: Cyril Marcilhacy/Bloomberg)

Historic Global Tax Deal Nears as G-7 Seeks Agreement on Tech

Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

The world’s richest governments enter a second day of talks in London seeking to pave the way toward a historic rewrite of the tax code for international business.

Finance ministers from the Group of Seven nations ended Friday closing in on a deal to jointly support a minimum corporate tax rate of at least 15% when broader international negotiations resume. That would signal an end to decades of countries racing each other to lower levies.

Differences remained on how to treat technology companies as part of a related effort to force multinationals to pay more tax in the places they operate. President Joe Biden’s administration is wary of American tech giants such as Facebook Inc. and Amazon.com Inc. getting unduly singled out.

Historic Global Tax Deal Nears as G-7 Seeks Agreement on Tech

U.S. Treasury Secretary Janet Yellen, U.K. Chancellor of the Exchequer Rishi Sunak and their G-7 counterparts are set to release a statement after discussions end.

Historic Global Tax Deal Nears as G-7 Seeks Agreement on Tech

Whatever they agree will set an important marker for upcoming talks with most of the world’s countries, some of whom, like Ireland, benefit from boasting low-tax havens. Domestic legislatures such as the U.S. Congress will also weigh in.

“We are close to an agreement and we are agreed all together that we need a very big step forward to fight against tax avoidance,” German Finance Minister Olaf Scholz said on Friday. “We all understand that big corporates must pay their fair share.”

A pact could be a money-maker for governments who have run up debt dealing with the economic fallout of the pandemic. A study published this week by the EU Tax Observatory projected that a 15% rate could generate the equivalent of 41 billion euros ($49.9 billion) a year for the U.S. and 48 billion euros for European Union members.

Agreeing on the “at least” wording on a minimum levy would leave room for maneuver in wider talks involving around 140 nations on how to rework rules to stop multinationals shifting profits to low-tax jurisdictions. It would also give Biden’s administration a bargaining chip as it pursues its infrastructure plan in Congress.

Historic Global Tax Deal Nears as G-7 Seeks Agreement on Tech

Governments have been trying to find common ground on dealing with companies for much of the past decade in discussions overseen by the Organization for Economic Cooperation and Development.

But it was the arrival of Biden on the world stage which gave the talks fresh impetus, first with the proposal for a minimum rate of 21%. It wasn’t clear on Friday night whether a specific rate would be included in the G-7 communique.

Historic Global Tax Deal Nears as G-7 Seeks Agreement on Tech

“Clearly 15% is only a starting point, and if it is higher, it is better to have a level of rate that is higher than 15%,” French Finance Minister Bruno Le Maire told the BBC on Friday.

A G-7 deal would help build momentum -- and potentially clear some obstacles -- ahead of a meeting of financial officials in the larger Group of 20 in July and the G-20 summit of leaders in October.

According to one official on Friday, one of the sticking points is a U.S. demand that France, Italy and the U.K. immediately drop digital taxes once a deal has been struck -- even before it has been implemented.

European governments, under political pressure at home, have insisted those rules must target digital firms such as Alphabet Inc.’s Google and Amazon.com. But the U.S. has said -- under Biden as well as his predecessor, Donald Trump -- that there should be no bias against mainly American companies in a new rulebook.

The U.K. said in a statement Friday that finance ministers held “productive negotiations about reforming the global tax system and tackling the tax challenges that arise in a complex, digital global economy.”

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.