A newly inked global deal to tax multinational tech corporations is good for Canada and its businesses, federal Finance Minister Chrystia Freeland said Saturday after a framework agreement was reached among G7 finance ministers.
Britain's Treasury chief Rishi Sunak, the meeting's host, said the deal would reform the global tax system to make it fit for the global digital age and to ensure "the right companies pay the right tax in the right places".
U.S. Treasury Secretary Janet Yellen said in a statement that a global minimum tax would end the "race to the bottom in corporate taxation". The rules would apply to global firms with at least a 10 per cent profit margin - and would see 20 per cent of any profit above the 10 per cent margin reallocated and then subjected to tax in the countries they operate.
To this end, the ministers agreed in principle to set a 15 percent minimum tax rate.
Paschal Donohoe was among the world leaders who attended the G7 summit of finance ministers in London - as Ireland's multinational tax practices featured on global front pages.
Japanese Finance Minister Taro Aso said on Monday that he did not expect agreement this week on a specific minimum tax rate.
"Talks are going well", a British source familiar with the negotiations said.
Britain said talks on tax policy had been productive but differences remained. The first part lets countries tax a share of the profits earned by companies that have no physical presence but have substantial sales, for instance through selling digital advertising.
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 US tech giants for tax practices that European companies also use. Other countries have followed suit.
Johnson hits back after ex-aide alleges lies undermined pandemic response
A UNION is calling for a public enquiry over the lack of strategy from the government's handling of COVID-19. Opposition politicians and families who have lost loved ones to COVID-19, want it to start sooner.
Part of the agreement Saturday is that other countries would repeal their unilateral digital taxes in favor of a global agreement.
The idea behind the tax is to level the playing field globally, and remove jurisdictions where large multinational corporations are able to avoid paying tax.
"Their business model gives them chances to avoid taxes ... much more than other companies", Scholz said.
The framework could force some of the world's biggest companies, including USA -based tech giants like Facebook, Google, Apple and Microsoft, to pay taxes in countries where they have high sales but no physical headquarters. It also supported awarding countries the right to tax 20% or more of profit exceeding a 10% profit margin.
"It is increasingly clear that in a complex, global, digital economy, we can not continue to rely on a tax system that was largely designed in the 1920s".
Campaign groups such as worldwide development charity Oxfam also said the minimum tax rate should be much higher. That would deter the practice of using accounting schemes to shift profits to a few very low-tax countries because earnings untaxed overseas would face a top-up tax in the headquarters country.
Biden had been planning to raise the USA domestic corporate tax headline rate to as high as 28%.
But Irish finance minister Paschal Donohoe, whose country is potentially affected because of its 12.5 per cent tax rate, said any global deal also needed to take account of smaller nations. Biden's proposal requires congressional approval. At the same time, measures will be put in place to make sure that taxes are appropriately paid in the countries where the firms operate.