Leading advanced economies are set to agree a common position on taxing multinational corporations on Saturday in a bid to end a three-decade race to the bottom in corporate taxation that will boost revenue for governments around the world.
Finance ministers from the Group of Seven major nations were still arguing over details of the deal late Friday, at a meeting in London hosted by British Finance Minister Rishi Sunak.
Delegates at the meeting said the G7 would agree in principle to change the basis of international corporate tax law for the first time in a century. The historic plan is to force the world’s largest corporations to pay more taxes in the countries in which they do business, not just where they are headquartered.
German Finance Minister Olaf Schulz told the BBC he was “absolutely confident” that ministers would reach an agreement. “We are going to have an agreement that will really change the world,” he said.
Bruno Le Maire, France’s finance minister, said ministers were on the verge of reaching a “historic agreement” that would show the world that the G7 remains a global force in defining the rules of the game in the 21st century international system.
A person closely involved in the negotiations said he expected a “very good statement” when the talks ended on Saturday.
Countries have been negotiating an international tax agreement since 2013. Talks at the Organization for Economic Co-operation and Development have left the US and European countries at loggerheads, particularly over taxes on big US tech companies, but the prospects for a deal have risen dramatically after the resolution Joe Biden replaced Donald Trump as President of the United States earlier this year and made new proposals.
G7 finance ministers are expected to issue a statement on Saturday outlining their new common position and backing the Biden administration’s call for a global order for the world’s largest companies and a global minimum rate.
Issues that remain to be settled include whether any global minimum taxes would be at the 15 percent proposed by the US or whether they should be defined as “at least 15 percent,” according to a person involved.
Two people familiar with the talks said the US is pushing a “tough bargain” on the question of when the UK, France and Italy should get rid of their digital taxes when striking a deal.
The US wants this to be immediate, but France and the UK believe this is not a start because it will leave the digital giants paying lower taxes than they do now based on a commitment that the US will implement an agreement, but before the laws. It was passed in Congress.
“We’re hoping for an agreement, but the details are finely balanced,” said one of the people involved.
Britain’s Treasury said there had been “progress” but Sunak’s allies said there were still sticking points over which companies would be responsible and how much of their global profits would be affected.
Meanwhile, the US is keen for a lower rate globally because it would stop its tech giants shifting their profits to lower-tax jurisdictions.
Much of the taxes collected likely come from US companies, so the aforementioned person said Janet Yellen, the US Treasury secretary, was “driving a tough deal”.