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June 14, 2021

G7 Countries Reach Deal On Global Minimum Tax

Last week, finance ministers from G7 countries (Canada, France, Germany, the United States, Italy, Japan, and the United Kingdom) announced a deal that, if enacted, would impose a global minimum tax of at least 15 percent and create a new taxing right that would reallocate a portion of the profits of the “largest and most profitable” companies to their market jurisdictions. The 15 minimum tax would be paid in the country where a company is headquartered.

In a statement, U.S. Treasury Secretary Janet Yellen said, “That global minimum tax would end the race-to-the-bottom in corporate taxation, and ensure fairness for the middle class and working people in the U.S. and around the world.” She continued, “The global minimum tax would also help the global economy thrive, by leveling the playing field for businesses and encouraging countries to compete on positive bases, such as educating and training our work forces and investing in research and development and infrastructure.”

The announcement is far from the final word on this issue, however. As The Wall Street Journal explained, “New tests come in the months ahead, as details get hashed out and governments see which country goes first.”

The Journal also warned, “Those that move ahead before others could damage their revenue bases and companies, according to tax experts, and those lagging behind a global consensus could be hurt too.” Specifically, the G7 ministers will have to convince other countries,  like Ireland, that oppose the minimum tax that they too must adopt it. What that means: it could take years before this proposal is implemented, if it is at all.

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