LONDON — A landmark deal agreed by the world’s richest nations on Saturday will see a global base rate of corporation tax multinational companies including tech giants like Amazon, Apple and Microsoft.
After two days of talks in London, finance ministers from the Group of Seven or G7, said that they had signed up to having a global minimum corporation tax rate of at least 15 percent.
Changes would also be made to ensure major companies, especially those with a strong online presence, would pay taxes in the countries where they record sales and not just where they have an operational base.
Treasury Secretary Janet Yellen who attended the talks in London, hailed the deal, writing on Twitter that the ministers had “made a significant, unprecedented commitment today that provides tremendous momentum towards achieving a robust global minimum tax at a rate of at least 15 percent.”
Britain’s finance minister Rishi Sunak, who chaired the meetings, called it “a proud moment,” which would create a level playing field for companies around the world.
Ministers from the other members — Canada, France Germany, Italy and Japan — also signed-up to the joint communique which said the deal would address “the tax challenges arising from globalization and the digitalization of the economy and to adopt a global minimum tax.”
President Joe Biden had initially proposed a minimum global rate for corporation tax — the tax that businesses pay on their profits — of 21 percent. But last month the Treasury Department put forward a plan for a “floor” of 15 percent.
Leaders of the Group of 20 major economies, or G20, including emerging economies like China and India, will also likely be lobbied to sign up to the rate floor.
The public coffers of many nations are running low after the coronavirus pandemic, as many wealthier countries borrowed hundreds of billions of dollars to prop up their economies — a shortfall they now need to urgently recoup.
Any final agreement could have major repercussions for low-tax countries and tax havens but national governments could still set whatever local corporate tax rates they wish.
But if companies pay lower rates in a particular country, their home governments could now potentially “top-up” their taxes to the minimum rate, eliminating the advantage of shifting profits from one country to another.
The U.S. has proposed levying the new global minimum tax only on the world’s 100 largest and most profitable companies.
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The deal would require a final sign-off at the G7 summit in England next week, which will see world leaders descend on Carbis Bay, a small seaside town around 300 miles southwest of London.
The global recovery from the pandemic is set to be high on the G7 agenda, as well as tackling climate change.
It will be Biden’s first foreign trip as president when he travels to the summit. His trip will also include a meeting with Britain’s Queen Elizabeth II and he will also attend a NATO meeting in the Belgian capital, Brussels.