Some believe that the Global Tax Deal struck by world’s advanced economies are a far cry from the regulation of behemoths.
- G7 Summit strikes a landmark global corporate tax deal, eliminating avenues of tax avoidance.
- Finance Ministers of seven advanced economies of the world attend the meeting under U.K.’s presidency.
- Biden proposes a higher rate, while a few European countries unsatisfied with the agreed rate.
The G7 nations finally reached a historical agreement on this weekend, changing the course for tech giants worldwide. The same old ways that were doing no good to the world but multinational corporations, have been revised after 1920, League of Nations.
In the landmark agreement by the G7 nations in London, a global minimum tax rate has been decided, eliminating avenues for tech behemoths to escape taxes they are obliged to pay. This, along with a few other groundbreaking proposals that will still take several years to translate into tangible results, impacts the future of world in more ways than just tax collection.
Ending decades of competition among countries to lure tech moguls with low tax rates, the Finance Ministers of 7 advanced economies of the world (G7) agreed to fix global corporate tax rate at 15%.
Leaderships of the first world countries are becoming increasingly wary of the growing power and influence of tech giants like Facebook, Amazon, Apple and Microsoft. The decision didn’t come out in an easy unison, instead, with a couple of differences and disagreements which were eventually mediated to hold business organizations responsible for their ways.
This year marked 47th G7 Summit and was hosted by the United Kingdom under the rotating presidency for the year.
Key takeaways from the G7 Global Tax Deal 2021
The agreements made in the G7 meeting, will be forwarded to the G20 group in July for further discussion and decisions. Following are the major highlights of the Global Tax Deal proposed by the leading economies of the world.
- The aim of the summit this year was to find a viable solution to eliminate tax avoidance by multinational corporations and demotivate moving operations overseas for profit manipulation.
- Agreement to levy minimum 15% corporate tax on globally to fix the issue of countries undercutting each other.
- Mandatory guideline for corporations to release report on climate impact due to their operations and investments.
- Corporations to pay taxes not just in the headquartered nation, but everywhere they operate.
Despite hitting the right chord to keep the outreach and financial exploitaion by multinational business giants in check, there a few flaws in the plan proposed by nations.
Experts still believe that a global minimum tax rate will hardly do much to stop tax evasion. 15% is not a figure that can bring a substantial change for the tax order globally, or trouble the multinational giants. In fact, it is just a little over the tax rate charged in countries like Ireland and Singapore which are actually a tax haven for these corporations.
President Biden proposed to keep the minimum take rate at 21% which was at least good, if not great. However, European countries like Ireland who provide a safe haven for the corporations, opposed even 15% rate which is equal to virtually no tax.
Some have even argued that it makes the right to devise tax policies of the nations vulnerable, with the advanced economies dictating the world of tax orders.
What is G7 Group?
G7, which stands for Group of 7, is an organization comprising world’s seven most advanced economies as the members. It was formed in 1975 after the world was hit by first ever oil shock and the financial crisis that followed.
The member countries include the U.S., the U.K., Germany, Japan, France, Italy, and Canada.
Who is in the G7?
As mentioned above, the member countries are the U.S., the U.K., Germany, Japan, France, Italy, and Canada. Russia joined the G7 in 1998, making it G8. However, it was expelled from the group on Mar 24, 2014 due to Russia’s annexation of Crimea. That year, the country under the leadership of Vladimir Putin was the host of G8 Summit in the city of Sochi, however, the G7 cancelled the meeting.
China still remains from winning a membership in the group as despite a massive GDP, its per capital income remains low.
When was the G7 Summit 2021?
This year marks the 47th summit of G7. The meetings have already begun, resulting in the landmark global tax deal. The Summit 2021 is to begin on June 11, 2021 and continue till June 13.
No one country holds the presidency of the group. In a rotational presidency, the Summit 2021 is being hosted by the U.K. under Prime Minister Boris Johnson’s leadership in Cornwall.
The Summit to be held in Cornwall will be attended by major global leaders like Joe Biden, Angela Merkel, Justin Trudeau, etc.