Economy

G7 nations set to green-light global tax deal ahead of summit

Deal would impose minimum 15% corporate tax rate on international tech firms’ profits

The IMF has warned that the introduction of a minimum global corporate tax rate could – in an ‘extreme scenario’ – wipe out half of Ireland’s €11.8 billion corporate tax base. Photograph: iStock

Thu May 27 2021 - 19:54

A global tax deal that would impose a minimum 15 per cent tax on the profits of big international tech companies could be given the green light ahead of the G7 summit in Cornwall next month.

Talks between the leaders of the richest seven nations are understood to be delicately balanced as they seek to hammer out a framework agreement before they meet in England on June 11th.

Sources close to the talks said a framework for a deal is likely to be in place, allowing the G20 group of nations to agree a final draft at a meeting in July.

The deal is aimed at preventing about 100 big corporations such as Google, Apple and Amazon from shifting their vast profits to tax havens such as Bermuda or the Cayman Islands, or low-tax jurisdictions such as the Republic, which applies a 12.5 per cent rate. Any move to 15 per cent is unlikely to appeal to the Government, while the IMF has warned that the introduction of a minimum global corporate tax rate could – in an "extreme scenario" – wipe out half of Ireland's €11.8 billion corporate tax base.

READ MORE

Failure to agree a deal with the Trump administration in the US prompted the UK and France to impose their own digital taxes, which have taken effect over the last two years.

A plan that would force public companies to disclose their impact on carbon emissions is also expected to be announced at the G7, though a UK treasury source said a decision was on “a knife-edge”.

Exports

It is understood that Germany and Japan, which rely for exports on heavy manufacturing industries, are among the countries concerned about the proposed new rules.

Developing countries have demanded that the scope of the planned 15 per cent corporation tax deal should be extended to include smaller global businesses that use tax havens, saying the deal under discussion will do little to help those states.

The US has demanded that the scheme include corporations outside the tech industry, but it understood that the G7 nations believe it would be unwieldy and complicated to broaden the number of firms beyond the estimated 100 already targeted.

The Biden administration joined the project with a proposal for a minimum 21 per cent tax rate, but later dropped this call following strong lobbying from countries with low corporation tax rates. – Guardian service

LATEST STORIES