After debating the issue for more than eight years, the Secretary-General of the Organization for Economic Co-operation and Development (OECD), Mathias Cormann, welcomed a historic international. a settlement Designed by the G-7 finance ministers of the United States, Japan, the United Kingdom, Germany, France, Italy and Canada on key elements of global tax reform to address tax challenges related to digitization and the globalization of the economy. The economy is digitizing at a rapid pace with the occurrence of the COVID-19 pandemic.
The agreement states that the largest multinational tech giants pay their fair share of tax in the countries in which they operate, at a global minimum rate of at least 15%. If the agreement is finalised, it could help build momentum for a comprehensive deal in talks with more than 139 countries in Paris as well as at the upcoming G-20 finance ministers meeting in Venice in July.
The G-7 nations also agreed to follow the UK’s lead and make climate reporting mandatory, and they agreed on measures to crack down on the proceeds of environmental crimes, to ensure it plays its part in the transition to market zero. Do it
As Rishi Sunak, the Finance Minister of the United Kingdom, said After the G-7 meeting in London:
“G7 finance ministers have reached a landmark agreement to reform the global tax system to make it fit for the global digital age.”
She also couple: “These seismic tax reforms are something the UK is pushing for and there is a huge reward for British taxpayers – building a better tax system for the 21st century. This is truly a historic agreement and I am proud That the G-7 has shown collective leadership in our global economic recovery at this critical time.”
OECD Secretary-General Corman also enthusiastically welcomed the outcome of the G-7 Finance Ministers’ Meeting:
“The combined effect of globalization and digitization of our economies has led to distortions and inequalities that can only be effectively addressed through multilaterally agreed solutions.”
He continued: “Today’s consensus among the G7 finance ministers, including minimum levels of global taxation, is a historic step towards the global consensus needed to reform the international tax system. Significant work remains to be done. But this decision has been taken by 139 members. The OECD/G20 inclusive framework on BEPS adds significant momentum to subsequent discussions between jurisdictions, where we continue to seek a final agreement to ensure that multinationals everywhere pay their fair share.
global tax reform
G-7 Finance Ministers agreed on the principles of a two-pillar global tax solution to address the tax challenges arising from an increasingly globalized, digital global economy put forth by the OECD.
Under Pillar One’s principles, the largest, most profitable multinationals must pay taxes in the countries in which they operate – not just where they are headquartered. These rules will apply to global corporations that have a profit margin of at least 10%, and 20% of any profit above that 10% margin will be reallocated and subject to tax in the countries where they operate. .
Under Pillar Two, these companies will pay a minimum global corporate tax of at least 15% on a country-by-country basis.
improving climate disclosure
Ahead of London Climate Action Week, the G-7 finance ministers were working for the first time to properly incorporate ideas about climate change and biodiversity loss into economic and financial decision-making processes and to create climate-related environmental issues. expedited the action. Financial disclosure is mandatory in their respective economies. In November 2020, the United Kingdom became the first country to do so.
The push towards mandatory reporting is also being discussed by a wider group of G-20 countries. It is expected that nations will agree to mandate climate-related financial disclosure in their respective economies ahead of the United Nations Climate Change Conference (COP26) of the Parties in Glasgow in November.
The views, opinions and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
selva ozelli, Esq., CPA, is an international tax attorney and certified public accountant who writes frequently about tax, legal and accounting issues for Tax Notes, Bloomberg BNA, other publications, and the OECD.