LONDON — A landmark deal agreed upon by the world's richest nations on Saturday will see a global minimum rate of corporation tax placed on multinational companies including tech giants like Amazon, Apple and Microsoft.
Changes would also be made to ensure major companies, especially those with a strong online presence, would pay taxes in the countries where they record sales, not just where they have an operational base.
Treasury Secretary Janet Yellen, who attended the talks in London, hailed the deal, writing on Twitter that the ministers had "made a significant, unprecedented commitment today that provides tremendous momentum towards achieving a robust global minimum tax at a rate of at least 15 percent."
Britain's finance minister Rishi Sunak, who chaired the meetings, called it "a proud moment" that would create a level playing field for companies around the world.
Ministers from the other G-7 members — Canada, France, Germany, Italy and Japan — also signed up to the joint communiqué, which said the nonbinding deal would address "the tax challenges arising from globalization and the digitalization of the economy and to adopt a global minimum tax."
President Joe Biden had initially proposed a minimum global rate for corporation tax — the tax that businesses pay on their profits — of 21 percent. But last month the Treasury Department put forward a plan for a "floor" of 15 percent.
Leaders of the Group of 20, or G-20, major economies, including emerging economies like China and India, will also likely be lobbied to sign up to the rate floor.
The public coffers of many nations are running low due to the coronavirus pandemic, as many wealthier countries borrowed hundreds of billions of dollars to prop up their economies — a shortfall they now need to urgently recoup.
Patrick Holden, an associate professor of international political economy at England's University of Plymouth, told NBC News the deal was "historic" and a major shift, after decades of unrestrained tax competition.
He added that the deal would help "rebalance" the relationship between the state and big business.
Calling it a "big win" for the Biden administration in particular, Holden said, however, that smaller countries were less likely to directly benefit from the pact. Although tech giants may be the most impacted, other types of multinational corporations would also be caught by the global deal, he added.
The U.S. has proposed levying the new global minimum tax on the world's 100 largest and most profitable companies.
Any final agreement could have major repercussions for low-tax countries and tax havens, but national governments could still set whatever local corporate tax rates they wish.
However, if companies pay lower rates in a particular country, their home governments could now potentially "top-up" their taxes to the minimum rate, eliminating the advantage of shifting profits from one country to another.
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The deal would require a final sign-off at the G-7 summit in England next week, which will see world leaders descend on Carbis Bay, a small seaside town around 300 miles southwest of London.
The global recovery from the pandemic is set to be high on the G-7 agenda, along with tackling climate change.