After the virtual meeting of the Finance Ministers of the G7 member countries on 28 May, and the face-to-face meeting over the weekend of 4-5 June in London, the organisation announced the agreement reached on corporation tax. The announcement also covered a series of headings that allude to issues such as an egalitarian economic recovery, climate action, support for developing countries and ensuring a better future.
It is near the end of the document that the most outstanding measures that emerged from the meeting can be found. The first of them deals with taxation in the country of operation, not the country of the corporation’s headquarters. The G7 reiterated its commitment to “reach an equitable solution (…) granting countries tax rights on at least 20% of profits exceeding a 10% margin for the largest and most profitable multinational companies.”
Further, the G7 stated that “we will establish proper coordination between the application of the new international tax rules and the abolition of all taxes on digital services, and other similar measures relevant, for all companies. We are also committed to setting a global minimum tax of at least 15%, country by country.”
It should be stressed that this agreement, which has been described by the media and its protagonists as historic, is not yet binding. Global corporation tax will continue to be debated at the G20, and by the OECD, which comprehends 38 countries, where a more complex debate is expected.
Progress towards a greener and more sustainable financial sector was also part of the announcement. It is expected that the G7 countries will make progress in implementing mandatory reporting of ESG criteria and “climate-related financial reporting that provides coherent and useful information for decision-making by financial market participants.”
The communication also refers to another issue that has appeared repeatedly in the conversations of international organisations since at least 2019 – debt sustainability. Among the agreements reached, the G7 encourage the private sector to adhere to the “voluntary principles for debt transparency” of the Institute of International Finance (IIF).
Augusto Berutich, Global Head of Tax at Auxadi, said: “Without a doubt, although there is still a long way to go for this to become a reality, an agreement reached in an area as relevant and sensitive as taxation is remarkable. It shows us what the future will be; an environment based on global business tax rules – not an amalgam of national taxation and conflicting interests. In the end, the generation of wealth is linked to the location of people and their capacity for consumption and investment, and taxation must address this reality. This agreement also shows that the organisations of tomorrow will not be able to ignore aspects such as sustainability. In short, we are seeing a paradigm of greater collaboration between countries, more adapted to the times we live in.”
Local Knowledge – International Coverage
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