France, Germany, Italy, Spain on verge of G7 deal to tax multinationals

G7 Finance Ministers meeting

Nations have been grappling with the question of how to deter companies from legally avoiding paying taxes by resorting to tax havens - typically small countries that entice companies with low or zero taxes, even though the firms do little actual business there.

Such a deal aims to end what U.S. Treasury Secretary Janet Yellen has called a "30-year race to the bottom on corporate tax rates" as countries compete to lure multinationals.

"I am delighted to announce that the G7 finance ministers today, after years of discussions, have reached a historic agreement to reform the global tax system to make it fit for the global digital age and crucially, to make sure that it's fair so that the right companies pay the right tax in the right places", Sunak said in a video clip on his twitter.

The communique said the G7 will provide for appropriate coordination between the application of the new worldwide tax rules and the removal of all digital services taxes.

In a letter on Friday, the finance ministers of France, Italy and Germany said they would work together to define "a common position on a new worldwide tax system" at the meetings. Leaders of the seven countries will hold their annual meetings June 11-13 in Carbis Bay, Cornwall, at England's southwestern tip.

The United States wants an end to the digital services taxes which Britain, France and Italy have levied, and which it views as unfairly targeting USA tech giants for tax practices that European companies also use.

Interrogated by members of the European Parliament's Committee on Economic and Monetary Affairs, Cypriot Finance Minister Constantinos Petrides said that Cyprus opposed both Biden's proposal for a minimum corporate tax and a recently reached deal by MEPs on improved transparency for tax reporting.

The news comes as official data showed Ireland's economy grew nearly 8% in the first quarter of 2021, during a harsh lockdown when most shops closed, as multinational firms' revenues helped it continue to buck pandemic downturn trends.

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US President Joe Biden is set to attend the summit on his first foreign tour since taking office in January. The U.S. considers those unilateral digital taxes to be unfair trade measures that single out big U.S. tech companies such as Google, Amazon and Facebook. And I will just say this: the world has noticed.

Worldwide discussions on the tax issue gained momentum after U.S. President Joe Biden backed the idea of a global minimum of at least 15% - and possibly higher - on corporate profits.

Furthermore, they will urge "equitable, safe and affordable access to Covid-19 vaccines" everywhere.

German Finance Minister Olaf Scholz on Saturday said the commitment was "very good news for justice and fiscal solidarity".

Ireland has expressed "significant reservations" about Biden's plan.

Proponents argue that a minimum tax is necessary to stem competition between countries over who can offer multinationals the lowest rate.

A spokeswoman said: "Under pillar one of this historic agreement, the largest and most profitable multinationals will be required to pay tax in the countries where they operate - and not just where they have their headquarters".

Britain wants multinationals to pay taxes that reflect their operations, as governments seek to fix finances battered by slashed tax receipts plus vast spending and borrowing during the pandemic.

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