G-7 tax deal seeks to end to Big Tech tax havens

Last weekend, finance ministers from the G-7 countries — Canada, France, Germany, Italy, Japan, the UK, and the US — agreed on tax reforms that could impact the world’s biggest digital companies.

As it stands, companies are taxed where they operate. Multinational companies can shift profits to countries with more favorable tax rates or no taxes at all. Example: In 2017, Google was accused of moving ~$23B to a tax haven in Bermuda.

The new plan would:

• Set a global minimum tax of at least 15%
• Award countries the ability to tax the most profitable multinationals 20% of profits exceeding a 10% margin

US Treasury Secretary Janet L. Yellen said the global minimum tax “would end the race to the bottom in corporate taxation and ensure fairness for the middle class and working people in the US and around the world.”

The Organization for Economic Cooperation and Development’s (OECD) last estimate indicated reforms could bring in $81B annually, though that was using a tax rate of 12.5%, per The Guardian.

So, how does Big Tech feel about it? 3 claim their support:

• Google told Sky News it supported the deal and hoped for a “balanced and durable” agreement.
• Facebook VP of global affairs Nick Clegg tweeted his approval, calling the agreement a “significant first step towards certainty for businesses and strengthening public confidence in the global tax system.”
• An Amazon spokesperson told CNBC that the proposal marked a step forward in efforts to “bring stability to the international tax system.”

What’s next?

In July, the G-7 will present the proposal to finance ministers from the G-20 nations, who could sign a final deal by October, per The New York Times.

Fun fact: The “double Irish with a Dutch sandwich” is a tax-evasion technique that uses Irish and Dutch subsidiaries to shift profits. So, way less delicious than we’d hoped.

NOTE: One of the biggest tax havens on Earth is right here in the US. Read our Sunday feature on how corporations use the state of Delaware to cut down their tax bills.