The United States, Britain and other leading countries reached a landmark agreement on Saturday to pursue higher taxes worldwide for businesses such as Google, Apple and Amazon.
In a move that could raise hundreds of billions of dollars to help them cope with the effects of COVID-19, the Group of Seven major developed economies agreed to recoup at least 15 percent of global companies and to pay higher taxes on markets where they sell goods and services.
“The G7 finance ministers have reached a milestone agreement to change the global tax system to suit the digital age,” British Finance Minister Rishi Sunak said after leading a two-day conference in London.
U.S. Treasury Secretary Janet Yellen has said “a huge, unprecedented commitment” will end what he calls the race going down with world taxes.
The agreement, which has been in force for many years, also promises to eliminate tariffs on national digital services levied by Britain and other European countries that the United States has improperly targeted U.S. technology giants.
However, measures will first have to be reached to reach a comprehensive agreement on the G20 summit – which includes some emerging economies – which will take place next month in Venice.
“It’s complicated and this is the first step,” Sunak said.
The ministers also agreed to go ahead and make companies announce their environmental impact in a general way so that investors can easily decide whether to fund themselves, which is Britain’s main goal.
Wealthy nations have long struggled to agree on a way to earn more money from big countries such as Apple,Google, Amazon, and Facebook, which often book profits in some areas where they pay little or no tax.
Officials of U.S. President Joe Biden have given suspended talks a new impetus by raising a 15 percent lower corporate tax rate, above the level in countries like Ireland but below the G7 lowest level.
Germany and France have also welcomed the agreement, although French Finance Minister Bruno Le Maire has said he will fight for corporate taxes to be lower than 15 percent, describing it as a start.
German Finance Minister Olaf Scholz said the agreement was “bad news for taxpayers around the world”.
“Companies will no longer be able to escape their tax obligations by booking their profits in countries with very low tax rates,” he added for business such as apple,google and amazon.
Irish Finance Minister Paschal Donohoe, whose country is likely to lose the most at 12.5% tax rates, said any international agreement also needed to look at smaller countries.
Sunak said the agreement was “a great reward” for taxpayers, but it was too early to know how much it would raise for Britain.
The agreement does not specify which businesses will be covered by the rules, referring only to “large and highly profitable international businesses”.
European countries fear that a business like Amazon could slip into the net as it reports lower profit margins than many well-known technology companies.