BREAKING: We have the first round of agreement on a global minimum tax

BREAKING: We have the first round of agreement on a global minimum tax

The finance ministers of the Group of Seven major industrialized nations met today to agree on a global minimum tax, the level of which has been much discussed in recent months.

Reuters now writes that an agreement has been reached among state leaders that 15% will be the minimum tax.

This means that states pushing for a lower tax rate have allowed Americans to propose a 15% rate. At the same time, this was really a compromise proposal, as Americans would have liked to have seen a switch above 20% in the past.

After many years of negotiations, the G7 finance ministers decided on a landmark agreement to help prepare the global tax system for the digital age.

British Finance Minister Rishi Sunak said after the agreement.

US Treasury Secretary Janet Yellen also spoke after the decision: Yellen said an important and unprecedented decision had been made that would allow for a fair distribution of tax revenue. The US Treasury Secretary said the agreement would help global economic development by eliminating low-tax competition between countries.

In a statement sent to Reuters, the finance ministers said they will ensure the necessary coordination between the introduction of new tax rules and the abolition of taxes on digital services that have been in place until now. Finance ministers are also confident that agreement will be reached with other governments and central bank governors at the G20. The finance ministers also said they would take steps to work together to contribute to the costs of climate change.

The agreement also requires companies to disclose the environmental impact of their activities in a more transparent manner.

Negotiations over a global minimum tax accelerated after the coronavirus pandemic caused hundreds of billions of dollars in budget losses. A change of US president was also necessary for this, as former President Donald Trump did not support the proposal. The aim of this measure is to avoid tax competition between individual countries, i.e. not to constantly lower the corporate tax rate from each other, and thus to attract foreign capital, as this would lose the budget of each country. It is understood that countries that use low tax rates to attract foreign capital (Ireland and Luxembourg, but also the Netherlands) do not like the proposal.

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Earlier, the Hungarian government also indicated that the idea of ​​a global minimum tax was not necessarily in Hungary’s interest, as it has one of the lowest corporate tax rates in Europe. According to the Hungarian government, tax competition is in the interest of the state, so it does not contribute to the introduction of a global minimum tax. By the way, the Hungarian government also participated in the technical consultation on this topic, Benedik Nobilis, Head of the Department of the Ministry of Finance, published the former portfolio in the article He wrote that there were many unresolved issues in this regard, and he himself was of the opinion that tax competition was not fundamentally harmful, but some kind of global action was already justified by the tax evasion of large global corporations. According to Nobilis, there are still many unclear questions about the tax rate, which, if not reassured, the introduction of the proposed rules could become a significant obstacle to the flow of capital among countries with near-average tax rates and better taxing. Impossible practices.

In recent months, Finance Minister Mihaly Varga and Foreign Minister Peter Sejjarto vehemently opposed the minimum tax.

The compromise reached in the G7 is not the final decision yet, as it will have to be discussed more broadly. However, with the seven most important developed nations in one location, the broader convention is practically at your fingertips. Wider negotiations will take place within the G20 in July. However, the agreement adopted today significantly increased the chances of success in subsequent negotiations.

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EU member states also separately discussed joint taxes for big tech companies, and Finally an agreement was reachedA preliminary agreement between the negotiating delegation of the Council of the Member States of the European Union and the European Parliament on the imposition of tax transparency on multinational companies with annual global sales of more than 750 million euros. Taxing American tech giants has also been a priority for European countries in negotiations on global minimum taxes. The digital taxes already in use to date along with the G7 agreement will be scrapped today.

In addition to the global minimum tax, the finance ministers of the Group of Seven industrialized countries unanimously called in their first in-person meeting since the pandemic that fiscal stimulus should be preserved, and its early withdrawal would jeopardize the global recovery. The issue is becoming more interesting by the day as inflationary pressures are also increasing in advanced economies, especially in the US, backed by loose monetary and fiscal measures (although monetary policy is likely to be the first to react here).

Cover Photo: Getty Images

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