Finance Ministers Reach Corporate Tax Deal At G7 Summit

The US has made it clear that it expects the UK, France and other countries that have implemented digital services levies to scrap those regimes in favour of a new minimum global corporate tax rate agreed by G7 finance ministers over the weekend.

The finance ministers of the G7 countries reached the agreement on Saturday at a meeting in London ahead of a summit in Cornwall this week.

The deal aims at making companies such as Amazon and Google pay more tax in more countries, and reducing their incentive to use offshore tax havens.

But campaigners said the deal as it stands would do little to ease tax inequalities.

‘Historic agreement’

“G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age,” said British finance minister Rishi Sunak on Saturday.

US Treasury Secretary Janet Yellen said the “significant, unprecedented commitment” reached on Saturday would involve European countries scrapping their digital taxes.

“There is broad agreement that these two things go hand in hand,” she said.

The UK introduced its Digital Services Tax following years of discontent over the small amounts of tax paid by US tech giants on profits made by selling services to British users.

It levies 2 percent on digital revenues derived in the UK.

Digital Services Tax

France and other countries have introduced similar regimes. EU countries have also pushed for tech tax discussions at the OECD, which have shown little progress.

The US last week announced tariffs on about $2bn of imports, including from the UK, in retaliation for the DST and similar taxes.

But it immediately suspended the tariffs for 180 days in order to allow talks to take place at upcoming G7 and G20 summits.

The move was an indication that it sees its 15 percent global tax “floor” as superseding the more specific national taxes that single out the biggest tech  firms, most of which are based in the United States.

German finance minister Olaf Scholz said the deal was “bad news for tax havens around the world”.

But key details remain to be ironed out, with the agreement stating that only “the largest and most profitable multinational enterprises” are to be targeted.

‘Far too low’

European countries were concerned that this might not affect Amazon, which has lower profit margins than most tech companies, but Yellen said she expected it would be included.

Not everyone was as optimistic, with campaign group Oxfam calling the minimum rate of 15 percent “far too low” and comparing it to the rates in low-tax countries such as Ireland, Switzerland and Singapore.  Ireland has a 12.5 percent tax rate.

“This is not a fair deal,” said Gabriela Bucher, executive director of Oxfam International. “The G7 had the chance to stand alongside taxpayers. They chose instead to stand alongside tax havens.”

Irish finance minister Paschal Donohoe said any broader agreement would need to take account of smaller countries’ interests.

The G7 countries have said they are aiming to achieve a broader agreement at the G20 summit in Venice in July.

The G7 includes the United States, Japan, Germany, Britain, France, Italy and Canada.