G-7 Countries Reach Milestone Global Minimum Tax Agreement

On June 5, finance ministers from the G-7 countries (the United States, Japan, Germany, Britain, France, Italy and Canada) reached a milestone agreement to impose a new global minimum corporate tax of at least 15 percent.

The levy would impact the largest of multinational companies, potentially forcing technology giants like Amazon, Facebook and Google, as well as other big global businesses, to pay taxes to countries based on where their goods or services are sold.

U.S. Treasury Secretary Janet Yellin has been calling for the introduction of such a minimum for some time, in an effort to slow the race to the bottom on corporate tax rates. Yellin notes that the Biden administration has already announced plans for bold domestic action, which include raising the U.S. minimum tax rate, and is in the process of renewing its international engagement with other countries, which she says is vital to ending the pressures of tax competition and corporate tax base erosion. Yellin argues that such a rate could be used to ensure that the global economy thrives based on a “more level playing field in the taxation of multinational corporations, and spurs innovation, growth and prosperity.”

How will the global minimum tax work?

The new rate minimum would apply to overseas profits of large multinational companies. Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could "top up" their taxes to the agreed minimum rate, thus eliminating the advantage of shifting profits to a tax haven.

The Biden administration has said it wants to deny benefits for taxes paid to countries that do not agree to a minimum rate.

Next steps

While this is an unprecedented milestone, the next big step is to get the G-20 nations to agree to the minimum rate. Yellin says the U.S. is working toward that accord, and notes that interplay with the European digital services tax will also need to be addressed.

Given the number of countries involved, it remains to be seen how this type of sweeping agreement will be finalized. The G-7 nations do exert significant influence and they’ll be pushing to obtain a similar agreement from the rest of the G-20. The pact is, in principle, aligned with the OECD framework on base erosion and profit shifting and, as such, the OECD welcomed the G-7 announcement as a step toward every company paying its “fair share” of taxes.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2023 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Tax BY Kirk Mitchell
Can “Moore” Tax be Refunded from IRS? How to Protect Your Potential Claim for Refund of §965 Foreign Corporation Transition Tax
Fraud, Tax BY Charlotte Garraway
5 Red Flags of Fraudulent ERC Providers
IRS Issues Moratorium on Processing New Employee Retention Credit Claims
IRS Releases Guidance on the Requirement to Capitalize Research and Experimental Expenditures
Automobile, Tax BY Steven Barber
How Did the IPIC Method Fare for Auto Dealerships Inventory in Year 2?
New Pennsylvania Annual Report Filing Requirement
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.