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Tech giants and tax havens targeted by historic G7 deal

Published 06/05/2021, 04:03 AM
Updated 06/05/2021, 01:02 PM
© Reuters. FILE PHOTO: Britain's Chancellor of the Exchequer Rishi Sunak speaks at a meeting of finance ministers from across the G7 nations ahead of the G7 leaders' summit, at Lancaster House in London, Britain June 4, 2021. Stefan Rousseau/PA Wire/Pool via REUTERS

© Reuters. FILE PHOTO: Britain's Chancellor of the Exchequer Rishi Sunak speaks at a meeting of finance ministers from across the G7 nations ahead of the G7 leaders' summit, at Lancaster House in London, Britain June 4, 2021. Stefan Rousseau/PA Wire/Pool via REUTERS

By David Milliken and Kate Holton

LONDON (Reuters) -The United States, Britain and other large, rich nations reached a landmark deal on Saturday to squeeze more money out of multinational companies such as Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL) and reduce their incentive to shift profits to low-tax offshore havens.

Hundreds of billions of dollars could flow into the coffers of governments left cash-strapped by the COVID-19 pandemic after the Group of Seven (G7) advanced economies agreed to back a minimum global corporate tax rate of at least 15%.

Facebook (NASDAQ:FB) said it expected it would have to pay more tax, in more countries, as a result of the deal, which comes after eight years of talks that gained fresh impetus in recent months after proposals from U.S. President Joe Biden's new administration.

"G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age," British finance minister Rishi Sunak said after chairing a two-day meeting in London.

The meeting, hosted at an ornate 19th-century mansion near Buckingham Palace in central London, was the first time finance ministers have met face-to-face since the start of the pandemic.

U.S. Treasury Secretary Janet Yellen said the "significant, unprecedented commitment" would end what she called a race to the bottom on global taxation.

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

Yellen also saw the G7 meeting as marking a return to multilateralism under Biden and a contrast to the approach of U.S. President Donald Trump, who alienated many U.S. allies.

"What I've seen during my time at this G7 is deep collaboration and a desire to coordinate and address a much broader range of global problems," she said.

Ministers also agreed to move towards making companies declare their environmental impact in a more standard way so investors can decided more easily whether to fund them, a key goal for Britain.

TAXING TIMES

Current global tax rules date back to the 1920s and struggle with multinational tech giants that sell services remotely and attribute much of their profits to intellectual property held in low-tax jurisdictions.

Nick Clegg, Facebook's vice-president for global affairs and a former British deputy prime minister, said: "We want the international tax reform process to succeed and recognise this could mean Facebook paying more tax, and in different places."

But Italy, which will seek wider international backing for the plans at a meeting of the G20 in Venice next month, said the proposals were not just aimed at U.S. firms.

Yellen said European countries would scrap existing digital services taxes which the United States says discriminate against U.S. businesses as the new global rules go into effect.

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

Key details remain to be negotiated over the coming months. Saturday's agreement says only "the largest and most profitable multinational enterprises" would be affected.

European countries had been concerned that this could exclude Amazon - which has lower profit margins than most tech companies - but Yellen said she expected it would be included.

How tax revenues will be split is not finalised either, and any deal will also need to pass the U.S. Congress.

French Finance Minister Bruno Le Maire said he would push for a higher minimum tax, calling 15% "a starting point".

Some campaign groups also condemned what they saw as a lack of ambition. "They are setting the bar so low that companies can just step over it," Oxfam's head of inequality policy, Max Lawson, said.

© Reuters. EU's Economy Commissioner Paolo Gentiloni, Eurogroup President Paschal Donohoe, World Bank President David Malpass, Italy's Finance Minister Daniele Franco, French Finance Minister Bruno Le Maire, Canada's Finance Minister Chrystia Freeland, Britain's Chancellor of the Exchequer Chancellor Rishi Sunak, Managing Director of the IMF Kristalina Georgieva, Germany's Finance Minister Olaf Scholz, U.S. Treasury Secretary Janet Yellen, Secretary-General of the Organisation for Economic Co-operation and Development (OECD) Mathias Cormann, Japan's Finance Minister Taro Aso pose for a family photo during the G7 finance ministers meeting at Lancaster House in London, Britain, June 5, 2021. REUTERS/Henry Nicholls

But Irish finance minister Paschal Donohoe, whose country is potentially affected because of its 12.5% tax rate, said any global deal also needed to take account of smaller nations.

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

Latest comments

Market manipulation at its best , green on monday
Lol. You got it backwards. Taxes are a big profit slicer.
China gets special treatment ofcourse. Chinas rise to power was in no way organic, it was organized and chosen by the banks and small hat tribe.
The customers pay for everything a corporation sells . The corporation only collects taxes for the government… unreinbursed btw
Globalists. Gotta love the chosen tribe.
and blown all the money on a bunch of BS socialist programs that will only make things worse. it's better to have it sitting in tax haven vs giving to the government.
G7-countries digging a hole for themselves. China must be so happy.
This benefits Eu. In return, eu still give usa the finger. Usa rep is d/u/m/p.
United States takes part in this deal. How can you say EU gives USA the finger?
sultan...It's been proven that corporations don't raise prices because of taxes. according to past history it just dosn't happen. that is a fallacy, a debunked idea, that the multinational corporations what you to believe.
djChan.. g7 just threw a monkey wrench into the power of the multinational corporations. power to play one country against another so they could avoid paying any taxes. I think you're talking about the fascist governments in China and Russia.
No, Russia and China follows the UN... the world cannot let a small group of 7 decide this and that... because the world has 100s of countries... China said this at the Alaska meeting... Go read Ray Dalio's the Changing World Order...
You're right, the G7 can't set the rules for the world, but they can set it for themselves, and if they decide that they don't like multinationals not paying their share, they can pass laws to tax them the difference in what they're saving through the tax havens. Alternatively, the multinationals can choose not to do business with the G7 countries. Are you comfortable with a family making $100k paying more in taxes than Amazon? Apple pay 12.5% officially in Ireland, but their effective tax rate (after loopholes) is 0.05%. It has no effect on who they hire or what they pay, that is determined by the job market. This is closing loopholes that have given the rich a higher percentage of the wealth than at any time in human history, while they automate and cut as much staff as efficiency will allow.
How u spend the tax money is what matters.. Not how much you collect.. FB Twitter and Google supported Biden. LOL
I think that will use money fos social revolution in progressive society
This is what we called Bowl Sheet...
They are coming for us. Did u liked covid 19? watch what is happening and soon you will see tht covid19 is nothing compared to what is coming.
whats coming is straight jacket for you mate
You need to stop getting your news from Facebook. Whatever crazy rabbit hole you're going down is messing up your head.
Whats coming is nothing for Americans because we have guns
The definition of Facism is when governments collude with corporations to rule…a country…or one world government.
chan g7 just threw a monkey wrench into the power of the multinational corporations. power to play one country against another so they could avoid paying any taxes. I think you're talking about the fascist governments in China and Russia.
That's not the definition of fascism. Fascism is an authoritarian system of government where the is complete subserviance to a single dictator with heavy societal norm rules. Like ******Germany, or North Korea today. What you're describing is the current US system with lobbyists and the unchecked power corporations hold since the Citizens United supreme court ruling. I think you need a new dictionary.
They automatically crossed out the 4 letter word that represents the German national socialist party of the 1920's - 1946, rhymes with potsy. You get the gist.
do these guys know there are more countries than G7? plenty of countries are more business friendly. Biden has cancelled everything Trump has done to this country
Someone didn't read the article.
Jesse, but but Biden is big bad, Orange Man good
Its a coordinated effort by all western nations to suffocate themselves with taxed and regulations to make China artificially superior.
I think it's long past time that we stopped listening to and stopped obeying these corrupt 🤡that only serve themselves and their banker bosses.
... As gravity attracts everything to fall, the same happens with taxes, those will attract stocks so the last will go lower
garbage. these people are pawns that's all they are. so they really serve the people? absolutely not. why are we still listening to these 🤡🤡🤡. they are puppets for the elite bankers that's all they are...
Inflation
You even read?
So essentially this will take money from smaller/poorer nations (like Ireland) that use low taxes to attract companies for much needed income, and give it to nations that do not have a greater need... cool, that's wonderful news, and a big win for equality (sarcasm).
Ireland will be fine. It's the only English speaking country in the EU and has a highly educated workforce. It's taxes will still be lower than most countries and it will actually get to take in some tax revenue. The only people this hurts are the companies who are abusing the system. 15% is still a very low tax rate.
Tony coll... the rich greedy and corupt multi national corporations friend. why would any responsibly run corporation, want to locate a corperate headquarters in a 3 world country, they usually are unstable and corrupt. I guess so they can bribe and control their leaders, and pay no taxes. it's time these multinational corporations pay their taxes or their corporate officers go to jail for tax evasion. we should start with Apple.
I agree with most of what you're saying, but Ireland isn't a third world country, it's not even close. It has a perfectly stable government (far more stable than the US these days -but that's not difficult), with a high percentage of college educated and a higher average personal income (by about $15k/year) than the US. What the multinationals have been doing is immoral, but not illegal. Hopefully this new minimum tax fixes that.
REDDDD IN MONDAY
ketchup ketchup Blood bath
sultan...It's been proven that corporations don't raise prices because of taxes. according to past history it just dosn't happen. that is a fallacy, a debunked idea, that the multinational corporations what you to believe.
No they won't. Markets still set prices, this will just hurt their already bloated profit margins.
LOL! All the "woke" corporations that supported Democrats just got what they deserve!
Monopolies are not a good thing, so break them up. The biggest threat to free markets and to freedom and liberty in general is big government.
Got what they deserve? The corporations are the ones pushing for higher taxes. It squashes the little guy and makes competition obsolote.
together with big business corporations ...cheaters and liars
ok let's all chip in buy a small island declare it sovereign then let all the corporations make there head quarters there for a 10% tax lol. the problem is corporations are always smarter then government. and new loopholes will arise immediately
It is not that corps are smarter; they have more flexibility.
I cannot receive money here I really need
I don't get what are you saying am the Philippines
I don't get what are you saying
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