The global gods of finance, also known as the money people from the Group of Seven (G7) participants, agreed to a deal that will affect multinational companies including Amazon, Alphabet (Google), Twitter and Facebook.
According to the Financial Times, the reps from Canada, France, Germany, Italy, Japan, the U.K. and the U.S. signed off on the move that will ensure those business behemoths will pay added taxes in the locations they operate.
The BBC reported the primary driver is to prevent companies from the practice of setting up in countries with low corporate tax rates and then declaring profits in those locations.
“I am delighted to announce that today after years of discussion G7 finance ministers have reached a historic agreement to reform the global tax system,” Rishi Sunak, the U.K.’s finance minister, said after the London meeting.
A few details:
- The “first pillar,” Sunak tweeted, applies to global companies with at least a 10 percent profit margin, the BBC said.
- Any profit above that would be subject to a 20 percent tax, and those revenues would be reallocated and taxed in the countries where they make sales, according to Sunak.
- A global minimum corporate tax rate would be introduced at a rate of 15 percent.
President Joe Biden’s infrastructure plans include a raise in the country’s corporate tax rate, Business Insider’s Juliana Kaplan reported, but with the G7 agreement more multinational companies could find it makes sense to remain in the U.S. when rates are compared around the world.
U.S. Treasury Secretary Janet Yellen tweeted that the global minimum tax will “end the race-to-the-bottom in corporate taxation” and would “level the playing field” for business.
“I really consider this a historic achievement, and it shows that multilateral collaboration can be successful,” Yellen told reporters on Saturday.