The G7 group of wealthy nations is close to a historic agreement to radically reshape international tax rules by using a global minimum rate of corporation tax to prevent abuse of the system by multinationals.
Finance ministers from the world’s biggest western economies were negotiating details late on Friday with the aim of reaching a landmark deal early on Saturday as part of talks being held in London.
Hosted by the UK chancellor, Rishi Sunak, several key details remain to be negotiated, but sources said an agreement in principle to overhaul the global tax system and to commit to a minimum rate of corporation tax was in striking distance.
Bruno Le Maire, the French finance minister, said the G7 was on the brink of a “historic agreement” that would build unstoppable momentum to implement lasting tax reforms. Following the G7 meetings in London, negotiations to reform the global tax system will take place at a wider G20 meeting in Venice next month.
It would then progress to negotiations at the Organisation for Economic Co-operation and Development in Paris between 135 countries with the aim of a deal being agreed in October.
Le Maire said that France wanted an ambitious rate for the minimum taxation to be agreed, on the basis of a 15% rate proposed by the US president, Joe Biden. “It is a question of fairness and efficiency. The American proposal, 15%, is a starting point, but if we can do more, we must do more.”
“There is a momentum. We need a strong and historic agreement tomorrow to give an impetus to the G20 level. It is an essential step. We have to seize it,” he said.
Olaf Scholz, the German finance minister, said he was confident a deal could be done by the time talks conclude on Saturday. “We will have an agreement which will really change the world,” he told the BBC.
UK Treasury officials said there had been productive discussions on global tax reforms, although insisted that any deal needed to include mechanisms to tax large digital companies in the countries where they operate, alongside a global minimum rate.
Sunak said this was a priority for the UK government, and added: “Opportunities to make truly lasting reforms like this do not come along very often.”
Several key details remain to be negotiated, including whether the G7 should commit to a specific corporate tax rate for the global minimum at this stage. Some nations are pushing to back a rate of 15% or above, while others want to hold back from providing detailed recommendations at this stage.
Questions also remain over when several European nations would drop unilateral digital services taxes, including the UK, France and Italy – seen as a key demand for an agreement from the US, which believes the measures unfairly target American firms.
Washington is pushing for the immediate removal of the taxes, and threatened on Wednesday to impose punitive tariffs on countries that keep them in place. However, sources close to the talks argued this would be difficult for the UK and EU nations to accept, as it would mean US tech giants such as Google paying less tax until the reforms are implemented – which could take several years.