Rishi Sunak greets G7 finance ministers at Lancaster House
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Finance Ministers from the world’s twenty biggest economies are meeting in Venice this weekend to discuss the landmark move aimed at getting multinationals, especially tech giants, to pay more into COVID-19 pandemic-hit government coffers. Mr Sunak, who said the deal would be a “huge prize” for the British taxpayer, got backing from the G7 last month.
US President Joe Biden initially proposed a minimum global rate of 21 percent which he said would raise more than $500billion for public services worldwide, before it was reduced to 15 percent following pressure from Congress.
At least 131 of the 139 Organisation for Economic Co-operation and Development (OECD) countries representing 95 percent of world GDP have also signed up to the historic deal.
But European Union member states Ireland, Estonia and Hungary are among the countries that have not yet signed up, despite France and Germany and EU officials backing the concept.
The pact to establish a minimum global corporate tax rate of at least 15 percent is an attempt to squeeze more money out of tech giants like Amazon and Google as well as other multinationals able to shop around for the most attractive tax base.
Hungary Finance Minister Mihaly Varga claimed the 15 percent was “too high” adding the rate would “obstruct” the country’s economic growth.
The suggestions have inflamed tensions with Dublin, with the Irish Government resistant to raising its corporation tax rate above 12.5 percent.
Finance Minister Paschal Donohoe, who chairs the group of eurogroup finance ministers, said Ireland had “reservations” about the deal but said Dublin would engage with counterparts.
The Express understands Dublin is not expected to shift on its stance this weekend.
Barbados, Kenya, Nigeria, Sri Lanka, St. Vincent, Peru and St Vincent and the Grenadines have also expressed concerns.
In a bid to defuse tensions across the EU member states over the plan, US Treasury Secretary Janet Yellen will travel to Brussels on Monday to meet with Bloc finance ministers.
Under a two-pillar point plan, the largest and most profitable multinationals will be required to pay tax in the countries where they operate, not just where their headquarters are based.
The rules would apply to firms with a profit margin of least 10 percent and would see 20 percent of any profit above the 10 percent margin reallocated and then subjected to tax in the countries they operate.
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Secondly, a 15 percent global minimum corporation tax would be operated on a country-by-country basis which would create a more level playing field for UK firms and cracking down on tax avoidance.
A draft Communique released ahead of the talks which conclude today shows all G20 members will back the move after eight years of wrangling over the issue.
It also urged any hold-out nations to join the deal with a statement, adding: “We call on [countries involved in the global talks] to swiftly address the remaining issues and finalise the design elements within the agreed framework together with a detailed plan for the implementation of the two pillars by our next meeting in October.
“We invite all members [involved in the discussion] that have not yet joined the international agreement to do so.”
Mr Sunak, who chaired a breakfast meeting of G7 Finance Ministers this morning, added: “At the G7 in London we achieved agreement on reforms that will ensure the right companies pay the right taxes in the right places.
“That provided the foundations for an historic agreement amongst more than 130 countries.
“Now is the time for the international community to rally together and build on this momentum to ensure we get the deal’s final details over the line by October.”
At a news conference this morning, Germany’s Finance Minister Olaf Scholz said that concerns from holdout countries will try to be addressed in coming months.
After the agreement today, world leaders will give it a final blessing at an October summit in Rome.
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