G7 Finance Ministers Meeting Ends With Heat On Facebook, Google and Amazon with Global Minimum Tax
The Finance Ministers of the G7 met this weekend and reached the landmark decision to create a global minimum corporate tax rate of at least 15%.
In a press release provided after the meeting, the Ministers claimed that they commit to “a global minimum tax of at least 15% on a country by country basis.” They also stated commitments to an equitable solution on taxing rights with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises.
The corporate minimum tax is another way of saying “getting rid of tax havens.” Tax havens have been the scourge for the world’s richest nations for decades. Multi-billion dollar companies like Amazon and the world’s largest hedge funds have made a practice of registering their headquarters in areas of the world that have little to do with their business, and much to do with zero taxes. This allows businesses to operate at full capacity within larger markets like the United States and Europe without having to pay taxes in their home countries.
Politicians all over the world have been trying for decades to wrangle in off-shore tax havens, but without international cooperation, attempts have been futile. That is until Saturday’s meeting, where the finance ministers of the United States, UK, Canada, Italy, France, Germany and Japan decided to finally push for the implementation of a global minimum.
The two-pillar strategy would apply to large global companies with a profit margin of 10% or more. These companies would now be required to pay taxes on 20% of profits they earn above the 10% threshold in countries where they generate the revenue.. The second pillar is the 15% tax rate, which would create a flat tax rate for companies generating profits within certain countries. Reuters reports that the global minimum tax rate would apply to overseas profits. Governments would still set whatever local corporate tax rate they wanted, but if companies pay lower rates in a particular country, their home governments could increase their taxes to the minimum rate, eliminating the advantage of shifting profits they add.
U.S. Treasury Secretary Janet Yellen said after the meeting, “We think it’s a fair way to collect revenues…I honestly don’t think there’s going to be a significant impact on corporate investment.” Yellen’s comments highlight that she does not believe companies will be significantly financially impacted by the increased taxes to a degree where important investing would cease. She also added that the $1.5 trillion tax cuts businesses enjoyed in 2017 did little to lift American investment, the NYT reports.
If enacted, the changes to the minimum tax rate would have tremendous impact on the world’s largest tech companies like Amazon, Facebook and Google. All three are notorious for paying close to zero in taxes in the United States, of which all are headquartered and operate.
More From GOBankingRates