G7 Nears Agreement on Introducing Global Minimum Corporate Tax

Foreign Media "Rapid Progress in Discussions... Agreement Expected on Minimum Tax Rate of 15%"

On the 5th, the G7 foreign ministers' meeting was held in London, UK [Image source=EPA Yonhap News]

[Asia Economy Reporter Kim Suhwan] The member countries of the G7, a group of seven major advanced nations (the United States, Japan, Germany, the United Kingdom, France, Italy, and Canada), are expected to soon reach an agreement on the introduction of a global minimum corporate tax for multinational corporations. If an agreement is actually reached, it is anticipated that a green light will be given this year for the adoption of a comprehensive global minimum corporate tax involving countries worldwide.

According to major foreign media on the 24th (local time), discussions on the introduction of a global minimum corporate tax among G7 countries have recently made rapid progress, and an agreement could be reached at the G7 finance ministers' virtual meeting scheduled for the 25th.

Furthermore, the G7 finance ministers are scheduled to hold an in-person meeting in London, UK, on the 4th and 5th of next month following the virtual meeting on the 25th. It is reported that the main points of the agreement will be specifically discussed at the London meeting. Once the final agreement is reached, the leaders will officially sign the agreement at the G7 summit held in the UK from the 11th to the 13th.

The global minimum corporate tax is a system that sets a minimum tax rate worldwide, and if the corporate tax paid by an overseas subsidiary falls below this minimum rate, the difference must be paid to the country where the headquarters is located. This system is being discussed to prevent multinational corporations from shifting sales to countries with lower corporate tax rates for tax avoidance purposes.

Previously, discussions on the global minimum corporate tax gained momentum after the Biden administration proposed setting a minimum corporate tax rate. On April 5th, U.S. Treasury Secretary Janet Yellen, in a speech at the Chicago Council on Global Affairs, stated that they are cooperating with the G20 to set a floor for corporate tax rates and urged countries to stop the 'race to the bottom' in corporate taxes. She proposed a minimum tax rate of 21%.

However, disagreements arose among G7 countries over the 21% tax rate, causing the discussions to reach a deadlock. In response, the U.S. government lowered its target rate from the initially proposed 21% to 15% to facilitate consensus.

If the G7 reaches a final agreement on the global minimum corporate tax, an official final agreement is expected to be reached at the upcoming Organisation for Economic Co-operation and Development (OECD) meeting this summer, which will involve 140 countries participating in the comprehensive global minimum corporate tax adoption.

Foreign media reported that if an OECD agreement is achieved, it is expected to bring about the most significant reform in the history of global corporate taxation over the past 100 years.