The G7 is close to tackling the taxation of the world’s largest companies

The set of seven advanced economies is close to an agreement on multinational corporation taxes, paving the way for a global agreement throughout the year to create new rules for imposing taxes on the world’s largest companies.

The G7 treaty could be closed on Friday after progress was made between the top officials in recent days – and it would be a strong and indispensable condition for reaching an agreement in the OECD in Paris and formal negotiations led by the broad G20.

The OECD agreement would probably lead to the biggest international upheaval corporation tax for a century, severely reducing the ability of companies to take profits to low-tax jurisdictions and ensuring that digital giants in the U.S. paid more taxes in the countries where they sold.

Under the Biden administration, the US is working hard to get the G7 to reach its own consensus as a way to push for OECD talks so that a final agreement can be reached in the coming months.

The USA last week its intentions were lowered by its overall minimum corporate tax rate, which fell from an effective rate of 21 per cent to 15 per cent to increase international attractiveness.

He also reassured other countries that it was serious in his offer to tax part of the global profits of large multinationals according to their sales location and that the two “pillars” of the agreement are inseparable.

In recent weeks, the US has become increasingly confident that most of the G7 is on board with its plans, based on plans made by the OECD last year. Germany and Italy have been in favor of a minimum global tax. Italian Finance Minister Daniele Franco, who is leading the G20, said on Friday that the latest US proposal is “another important step” and that the chances of reaching a global agreement on international tax reform are “now concrete”.

France and the United Kingdom have given more weight to the location of tax payments. International officials said the UK had been “difficult” in the negotiations. In London, ministers and officials have stressed that they want to ensure that the two elements of the agreement are prioritized and that the US administration is serious about pushing through the Congress to position corporate tax payments.

UK authorities over the weekend said their stance had not changed, but those close to the negotiations said there had been an intelligence meeting last week and a deal, initially in the G7, was likely.

The G7 has no formal role to play in the process, but the countries of the US, Japan, Germany, the UK, France, Italy and Canada form a strong bloc in other forums. The group will hold a virtual meeting of finance ministers on Friday and a personal meeting on June 4 and 5 in London to agree on the main elements of the deal, officials said.

If finance ministers can informally agree on the deal, G7 leaders can formally sign it at the Cornwall summit from 11 to 13 June, presenting a plan to the 135 nations negotiating under the OECD’s “inclusive framework”.

As a sign of growing interest in the possibility of a general agreement on corporate taxes, U.S. National Security Adviser Jake Sullivan wrote on Saturday: “The world is closer than ever to the global minimum tax. It’s great to welcome our proposal and to Secretary Yellen and to thank the partners around the world for their hard work. This is how it seems to take the world to the bottom of the race. “

The G20 has said it wants to reach an agreement in the summer and progress at the G7 makes that ambitious timetable possible, although officials close to the talks believe October may be a more realistic date for a full international deal.