France, Germany, Italy, Spain on verge of G7 deal to tax multinationals

G7 Finance Ministers meeting

Treasury chief Rishi Sunak said finance ministers from the Group of Seven leading industrialized nations signed the pact on the second and final day of meetings in London.

Regarding the commitment on taxation, Britain's Treasury noted that "the largest and most profitable multinationals will be required to pay tax in the countries where they operate - and not just where they have their headquarters".

"However, fixing a global minimum corporate tax rate of just 15 percent is far too low".

"That global minimum tax would end the race-to-the-bottom in corporate taxation, and ensure fairness for the middle class and working people in the USA and around the world", she tweeted after the meeting.

Le Maire said this represented "only a starting point".

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

"Opportunities to make truly lasting reforms like this do not come very often, and I sincerely hope that we seize the moment".

G7 finance ministers pose for a photo during their meeting at Lancaster House in London.

Due to COVID restrictions, ministerial delegations have been cut down and there are fewer traveling journalists.

During the meeting, the finance ministers agreed the principles of an ambitious "two pillar" global solution to tackle the tax challenges arising from an increasingly globalised and digital global economy.

In a letter on Friday, the finance ministers of France, Italy and Germany said they would work together to define "a common position on a new global tax system" at the meetings.

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

This is a truly historic agreement and I'm proud the G7 has shown collective leadership at this crucial time in our global economic recovery. That is not the same all over the world - the effective tax rate is a lot less.

Labour lamented that the G7 did not push for a higher base rate after USA president Joe Biden had initially called for a 21% minimum, which the party estimated would have raised an additional £131 million for public services. But on Thursday he offered to keep the rate unchanged at 21% but proposed a 15% tax floor after deductions and credits in a bid to gain support from Republicans for new spending measures.

Facebook 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 US President Joe Biden's new administration.

Ireland, which has expressed "significant reservations" about Biden's plan, has at 12.5 percent one of the lowest corporate tax rates in the world, prompting tech giants such as Facebook and Google to make the eurozone country their European base.

British, Italian and Spanish fashion, cosmetics and luxury goods exports to the United States will be among those facing new 25% tariffs later this year if there is no compromise.

Momentum has grown behind the US-led plans to limit the ability of multinationals such as tech giants to game the tax system to boost profits, especially at a time when economies around the world are reeling from the impact of the coronavirus outbreak.

Britain, Germany and France are open to this but want to ensure companies such as Amazon - which has lower profit margins than other tech firms - do not escape the net.