The Biden administration reached an agreement Saturday with other Group of 7 industrialized nations to tax multinational corporations at least 15%, even as President Biden seeks to raise domestic taxes on U.S. corporations to at least 21%.
The G-7 finance ministers reached the tentative agreement in London, saying it would force companies such as Google and Amazon to pay more in taxes and reduce their incentive to shift profits to offshore tax-havens.
“G-7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age,” British finance minister Rishi Sunak said after chairing the two-day meeting.
U.S. Treasury Secretary Janet Yellen called it a “significant, unprecedented commitment” to end what she has called a “race to the bottom” in international competition to lower corporate taxes.
“I think we will end up with a tax system that will be much fairer and end, effectively, much tax competition in the ability of large profitable multinationals to take advantage of tax havens to lower their corporate tax liabilities,” Ms. Yellen said.
In Washington, Mr. Biden is seeking to raise the U.S. corporate tax rate to at least 21% to raise revenue for his multi-trillion-dollar infrastructure proposals. The president initially proposed a domestic corporate tax rate of 28%.
Top congressional Republicans warned that the tentative G-7 agreement could harm U.S. businesses.
“It remains to be seen whether any agreement will result in consensus from the United States’ biggest foreign competitors,” said House Ways and Means Republican Leader Kevin Brady, Texas Republican, and Senate Finance Committee ranking Sen. Mike Crapo, Idaho Republican, in a joint statement. “The continued imposition and collection of digital services taxes and other unilateral measures, including from certain G-7 members, and plans to impose digital levies even with a global agreement, demonstrate that the United States cannot expect other countries to act in the interest of American businesses and workers.
They cautioned “against moving forward in a way that could adversely affect U.S. businesses, and ultimately harm American workers and jobs at a critical time in our country’s economic recovery.”
Ms. Yellen said the deal “isn’t a finished agreement.”
“We haven’t demanded or expressed the view that it’s necessary for us to have the same level globally, but we do hope that countries will be ambitious, and the agreement is at least 15 percent,” she told reporters. “We’ve yet to set the final rate. There is an agreement among the G7, though, to go for at least 15 percent. And I do think that’s an historic achievement.”