G7 Agreement on Minimum Taxes: ‘Historic Breakthrough’

Germany’s finance minister calls the agreement “historic,” and the British agreement is full of praise: at their meeting, the G7 finance ministers decided on a minimum corporate tax rate.

Federal Finance Minister Olaf Scholz was satisfied with the outcome of the G7 meeting. Agreeing on a lower tax rate is very good news for tax justice and solidarity and bad news for tax havens around the world. “This is a great historic achievement. The era of competition for tax cuts and dumping is over,” he said. There is a good chance that we will finally agree on minimum tax rules for companies around the world. “And this is something I’ve been working on for many years.”

Christoph Brussel
ARD-Studio London

British Chancellor of the Exchequer Rishi Sunak also described the outcome as historic: “I am very pleased to announce that today – after years of debate – the G7 finance ministers have finally reached a historic agreement to reform the tax system.”

Minimum tax rate of 15 percent

The agreement is just the first step, albeit an important one. Schultz 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, where representatives of India, Brazil and China will sit at the table. This tour will also address the minimum tax rate, Sunak said.

Ministers have decided a minimum tax rate of 15 per cent. Additionally, companies must pay taxes on their sales as they produce them. So far, companies have been able to shift profits and thus avoid taxes in countries with higher tax rates. French Finance Minister Bruno Le Maire had hoped for a higher tax rate of 15 per cent.

Ireland’s finance minister is hesitant

However, experts consider the higher rate unrealistic. Even in the European Union, there are countries that attract companies with lower rates, such as Luxembourg, the Netherlands and Ireland. Ireland’s treasurer seemed hesitant after the deal. He said nearly 140 countries participate in the global tax reform process of the Organization for Economic Cooperation and Development. Any agreement must serve the interests of nations 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 because companies can compete and invest on an equal footing. Facebook also welcomed the agreement on Twitter — and also admitted that it could mean the company will soon have to pay more taxes. According to a study by the European Union, a global minimum tax of 15 per cent would inject an additional 50 billion euros into coffers.

Opposition politicians in Berlin, for example the deputy leader of the left in the Bundestag, Fabio de Masi, expressed themselves decisively. He complained that the tax rate of 15 percent was too low.

G7 finance ministers agree on minimum taxes

Christophe Brussel, ARD London, 5.6.2021, 5:22 pm

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