The leading advanced economies are set to agree a common position on taxing multinational companies on Saturday in a bid to end a three-decade race to the bottom in corporate taxation which would raise extra revenue for governments around the world.
Finance ministers from the G7 group of nations were still haggling over details of the deal late on Friday, at a meeting in London hosted by UK chancellor Rishi Sunak.
Delegates at the meeting said the G7 would agree in principle to change the basis of international corporate tax law for the first time in a century. The historic plan aims to force the world’s biggest companies to pay more tax in countries where they do business, not only where they are headquartered.
German finance minister Olaf Scholz told the BBC he was “absolutely confident” that ministers would reach a deal. “We will have an agreement which will really change the world,” he said.
Bruno Le Maire, the French finance minister, said ministers were on the verge of a “historic agreement” which would show the world that the G7 was still a global force in determining the rules of the game in the 21st century international order.
One person closely involved with the negotiations said they expected “a very good communique” when the talks wrap up on Saturday.
Countries have been negotiating to seek an international tax accord since 2013. Talks at the OECD left the US and European countries at loggerheads, especially over the taxation of the big US tech companies, but prospects for a deal rose substantially after Joe Biden replaced Donald Trump as US president earlier this year and tabled fresh proposals.
G7 finance ministers are expected to release a statement on Saturday setting out their new common position and backing the Biden administration’s call for both a worldwide regime for the world’s largest companies and a global minimum rate.
Issues that remain to be settled include whether any global minimum tax would be at the 15 per cent rate the US has proposed or whether it should be defined as “at least 15 per cent”, according to someone involved.
Two people with knowledge of the talks said the US was pushing a “hard bargain” on the question of when the UK, France and Italy should get rid of their digital taxes when a deal is struck.
The US wants this to be immediate, but France and the UK think this is a non-starter because it would leave digital giants paying less tax than now on the basis of a commitment that the US will implement an agreement, but before the laws are passed in Congress.
“We hope to get an agreement, but the details are finely balanced,” one person involved said.
The UK Treasury said there had been “progress” but allies of Sunak said there were still sticking points on which companies would be liable and how much of their global profits would be affected.
The US, meanwhile, is keen on a global minimum rate as it would stop its tech giants shifting their profits to low tax jurisdictions.
Much of the tax raised is likely to come from US companies so the aforementioned person said Janet Yellen, the US Treasury secretary, was “driving a hard bargain”.