What they say: “Today, after years of discussions, G7 finance ministers have reached a historic agreement to reform the global tax system, prepare it for the global digital age – and most importantly to ensure that it is right for good companies to pay the right taxes in the right places,” Sunak said. When Treasury Secretary Janet Yellen and President Biden announced their intention to negotiate an agreement between the major industrialized countries to introduce a minimum tax rate of 21%, many experts and politicians turned their eyes. Yes, what are the chances that industrialized countries will abandon the “race to decline” to attract capital? This weekend, the Group of Seven Finance Ministers defied expectations. They have not set the minimum tax rate at 21 per cent, but they accept 15 per cent as well as additional taxes for the most profitable multinationals (including large tech companies). Dan: As you suggested, there are certainly complexities that will come. This is just the beginning of the process, but give us an idea of how likely you are that this agreement will actually be implemented. And where do we stand? The recent agreement by G7 finance ministers and central bank governors to introduce a global minimum tax of 15% has raised new questions to end the race to lower corporate taxation. Today, the G7 agreement is just the beginning. The seven nations that signed it must get the agreement of their own legislators, which will be a real challenge in the case of the United States. Mario: On the one hand, it`s still a complex process, because it`s due to be presented to the G20 next month. There is a good chance that they will agree. But then an agreement would have to be reached, probably in October, and the fun really starts for the rest of the world. But large companies rejoice – more security and less exposure.
And if these types of agreements are reached, there is really an optimistic assumption that there will be a coordinated approach across multiple jurisdictions. The last thing large companies want is to be taxed on the same income in multiple jurisdictions, so these types of proposals should minimize potential double taxation – and they are welcome. The agreement has yet to be ratified by the largest group of 20 and passed in the United States by Congress. But as the New York Times reported, “officials described the pact as a landmark deal that could transform global trade and shore up public finances that have been eroded after more than a year of fighting the coronavirus pandemic.” Yellen had the right to sing: The deal underscores Biden`s philosophical view that the world is now engaged in an existential struggle between democracies and illiberal regimes. (“This is a crucial question of our time: can democracies come together to achieve real results for our people in a rapidly changing world?”) The agreement also follows his determination to develop a foreign policy that is good for and promotes the interests of the American middle class.