On Saturday, May 5, 2021, the Group of Seven (G7) countries (which include some of the world’s richest countries) agreed to a global minimum corporate tax rate of at least 15%. This plan could pave the way for a worldwide deal on a minimum corporate tax rate, which would have far-reaching implications for multinational firms. The goal is to reduce incentives for these companies to shift their profits to tax havens, since the company’s home governments would have the ability to “top-up” taxes on profits made in lower tax countires to the minimum rate.
The G7 countires are meeting with the bigger G20 group next month, which will determine whether the accord will get further support. If they do, a final deal could happen as early as fall, though countries will need support from their respective governments. Specific details, such as the future of digital service taxes and metrics for determining how and to which companies this global minimum tax rate would apply, are still yet to be decided.