By Doug Connolly, MNE Tax
The G7 group of leading economies is about to reach an agreement to change the global rules for taxing multinational corporations. This is evident from articles published in the Financial Times (subscription required) and the Irish Times on May 24th. Following the progress made in the G7 talks this week, the articles report that an agreement could be reached as early as this Friday.
US Treasury Secretary Janet Yellen will meet virtually with her colleagues from the Treasury Secretary in the G7 ahead of the face-to-face meetings in London from June 4-5. Any deal struck within the G7 this week – Canada, France, Germany, Italy, Japan, the UK and the US – is expected to be formalized in London next week.
Efforts to revise global tax rules under OECD Pillar 1 on the allocation of tax rights and OECD Pillar 2 on setting a global minimum corporate tax are likely to require a broader consensus of nations than the G7. Such broader discussions take place within the framework of the OECD integrative framework, which consists of 139 countries. Still, if reached, a G7 agreement would likely have a significant impact.
Negotiations on Pillar 1 and Pillar 2 are also expected to continue at meetings between G20 finance ministers in July, which would provide the opportunity to reach broader consensus with other nations such as Australia, Brazil, China, India and South Korea. Any G7 agreement would likely be the starting point for these negotiations.
This week’s announcement of progress in negotiations within the G7 followed an announcement by the US Treasury Department last week that the US would agree to a minimum global tax rate of 15%. Officials from several G7 countries welcomed the move and cited it as significant progress on the way to compromise, but the acceptance of such an agreement by smaller countries like Ireland remains to be seen.
Doug Connolly is the Legal Editor, International Tax, at MNE Tax. He has more than 10 years of experience in tax law developments and previously worked for both a Big Four law firm and a leading legal publisher. He holds a law degree from the American University’s Washington College of Law.
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