Corporate tax deal tops agenda at G7 finance meet

Britain's Chancellor of the Exchequer Rishi Sunak (L, with US Treasury Secretary Janet Yellen) is hosting the G7 meeting on plans for a minimum global level of corporate tax.
Britain’s Chancellor of the Exchequer Rishi Sunak (L, with US Treasury Secretary Janet Yellen) is hosting the G7 meeting on plans for a minimum global level of corporate tax.

LONDON: Group of Seven finance ministers are set to kick off talks on Friday, with the spotlight on ambitious plans for a minimum global level of corporate tax.

British finance minister Rishi Sunak will host the meeting — which is being held in person after an easing of Covid restrictions — with counterparts from Canada, France, Germany, Italy, Japan and the United States.

The talks will prepare the ground for a broader summit of G7 leaders in Cornwall, southwest England starting on June 11, which will be attended by US President Joe Biden on his first foreign tour since taking office in January.

According to a draft communique seen by AFP, the finance chiefs and central bankers of the world’s seven richest nations will express “strong support” and a “high level of ambition” over a global minimum corporate tax.

They then hope to reach broader agreement at a G20 finance meeting scheduled for July.

Ministers also plan to commit to “sustain policy support”, or stimulus, for “as long as necessary” to nurture economic recovery, while addressing climate change and inequalities in society, according to the document.

Furthermore, they will urge “equitable, safe and affordable access to Covid-19 vaccines” everywhere in order to fully overcome the deadly pandemic.

And the thorny topic of the regulation of digital currencies such as bitcoin will also be on the agenda.

Biden has called for a unified minimum corporate tax rate of 15% in negotiations with the Organisation for Economic Co-operation and Development (OECD) and G20.

His proposal has so far won broad support from countries such as France and Germany, as well as the International Monetary Fund.

German Finance Minister Olaf Scholz suggested it would herald “a revolution in international corporate taxation”.

However, Britain, the current G7 host, has sat on the fence and called for wider reforms.

Ireland has expressed “significant reservations” about Biden’s plan. Its 12.5% tax rate is one of the lowest in the world, prompting tech giants such as Facebook and Google to make Ireland the home of their European operations.

Proponents argue that a minimum tax is necessary to stem competition between countries over who can offer multinationals the lowest rate.

They say that a “race to the bottom” saps revenues that could go to other government priorities.

The corporate tax is one of two pillars in efforts for global fiscal reforms, the other being a “digital tax” that would allow countries to tax the profits of multinationals that are headquartered overseas.

Britain wants multinationals to pay taxes that reflect their operations, as nations across the world seek to repair virus-battered finances.

“Securing a global agreement on digital taxation has also been a key priority this year,” Sunak said in a statement ahead of Friday’s meeting.

“We want companies to pay the right amount of tax in the right place, and I hope we can reach a fair deal with our partners.”

Britain, which later hosts the COP26 UN climate summit in November, also wants the G7 to embrace a green recovery.

However, NGOs accuse the G7 of failing to invest enough in green energy during the pandemic and massively subsidising polluting industries instead.

According to a report by Britain’s Tearfund and Overseas Development Institute (ODI) and Canada’s International Institute for Sustainable Development (IISD), the seven countries injected $189 billion into fossil fuels such as oil, gas and coal between January 2020 and March 2021, but earmarked only $147 billion for investment in clean energy.

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