G-7 Agreed on a 15% Global Minimum Corporate Tax

On Saturday, the Group of Seven (G-7) industrialized nations agreed on a 15% global minimum corporate tax as a way to prevent companies from avoiding taxes by parking profits overseas. The G-7 finance ministers meeting was held in London.

Key Takeaways

  • The G-7 group of financial leaders from seven industrialized nations agreed that a 15% global minimum corporate tax rate should be enacted.
  • A global minimum corporate tax rate has been proposed as a way to stop a race to the bottom as companies seek to avoid paying taxes by stashing profits in countries with the lowest possible tax rates.

On her way back from that meeting, U.S. Treasury Secretary Janet Yellen said higher interest rates would be a “plus” for the American economy. The meeting precedes an annual summit of G-7 leaders scheduled for June 11 to 13, 2021, in Cornwall, England. There will also be wider talks with 140 countries in Paris, and the Group of 20 finance ministers will be meeting in July, where this same topic is likely to come up.

While the global tax plan still needs approval from more nations, if enacted it would especially impact big U.S. tech firms such as Facebook, Apple, Amazon, and Alphabet, which reduce their tax burdens by recording millions in earnings in other countries. Shares of those companies were slightly lower in the pre-market. Several companies said they welcomed an overhaul of the global tax system.

Yellen’s comments came just days before the Labor Department is set to release the May Consumer Price Index (CPI). In April, prices rose 4.2%, the biggest jump since 2008, raising concerns about inflation and the potential for higher borrowing costs. The yield on the 10-year Treasury was up to 1.58%.