G7 Agreement on Minimum Tax: “A Historic Success”

The German finance minister called the agreement “historic”, and the British one is also full of praise: at their meeting, the G7 finance ministers decided on a minimum tax rate for companies.

Federal Finance Minister Olaf Scholz was satisfied with the outcome of the G7 meeting. Compromising on the lowest tax rate is great news for justice and solidarity and bad news for tax havens around the world. “This is a huge historic success. The era of tax cuts and dumping competition is over,” he said. There’s a good chance we’ll eventually agree on minimum taxation rules for companies around the world. “And it’s something I’ve been working on for many years.”

British Treasury Secretary Rishi Sunak also called the result historic: “I am very pleased to announce that today – after years of discussion – the G7 finance ministers have finally reached a historic agreement to reform the taxation system. Huh.”

Minimum tax rate of 15 percent

Compromise, though an important one, is only a first step. Scholz said the Organization for Economic Co-operation and Development (OECD) would deal with the decisions in the coming weeks. There is also a meeting of G20 finance ministers, in which representatives of India, Brazil and China will also sit at the table. Sunak said this round will also deal with the lowest tax rate.

The ministers have fixed the minimum tax rate at 15 percent. In addition, companies must pay taxes on their sales where they generate them. So far, corporations have been able to transfer profits and thus avoid taxation in countries with high tax rates. French Finance Minister Bruno Le Maire had expected a tax rate of over 15 percent.

Ireland’s finance minister reluctant

However, experts consider the higher rate unrealistic. There are also countries in the European Union that attract corporations with lower rates, such as Luxembourg, the Netherlands and Ireland. The Irish Treasury secretary seemed reluctant after the deal. He said that around 140 countries are involved in the OECD’s global tax reform process. Any agreement must serve the interests of countries large and small. The tax rate in Ireland is 12.5 percent.

US Treasury Secretary Janet Yellen expects the reform to have a positive impact on the global economy as companies can compete and invest on an equal footing. Facebook also welcomed the agreement to Twitter – also acknowledging that it could mean the company will soon have to pay more taxes. According to an EU study, a global minimum tax of 15 percent would shove an additional 50 billion euros into the vault.

Opposition politicians in Berlin, for example the leftist deputy leader in the Bundestag, Fabio de Masi, expressed themselves critically. He complained that the tax rate of 15 per cent was set too low.

G7 finance ministers agree on minimum tax

Christoph Prossel, ARD London, 5.6.2021, 5:22 pm.

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