G7 close to deal on corporate taxation

The Group of Seven top advanced economies are close to an accord on the corporate taxation of multinationals, paving the way for a global deal later in the year creating new rules for the imposition of levies on the world’s largest companies, the Financial Times reported on Monday.

The agreement would substantially curtail the ability of international companies to shop for tax advantages when choosing jurisdictions.

A G7 pact could be sealed as early as Friday after progress was made among top officials in recent days — and would be a powerful force and prerequisite for a deal in the formal negotiations taking place at the OECD in Paris and directed by the wider G20, the report said.

An OECD agreement would probably see the largest shake-up in international corporate taxation for a century, severely curtailing the ability of companies to shift profits to low tax jurisdictions and ensuring that US digital giants paid more tax in the countries where they made sales, according to the report.

Under the Biden administration, the US has been pushing hard for the G7 to reach its own consensus as a way of spurring the OECD talks so a final deal can be reached in the coming months.

The US last week scaled back its ambitions on a global minimum corporate tax rate, lowering it from 21 per cent to an effective rate of 15 per cent to increase its appeal internationally.

It also reassured other countries that it was serious in its offer to allow a slice of the global profits of the largest multinationals to be taxed based on the location of sales, and the two “pillars” of the deal are inseparable, the FT reported.

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https://www.ft.com/content/577253ce-dd30-4de2-8e4b-d3c1277a9463

If a deal can be agreed informally by finance ministers, the G7 leaders could formally sign it off at the Cornwall summit on June 11 to 13 presenting a plan to the 135 nations negotiating under the “inclusive framework” at the OECD.