G7 Nations Agree on Minimum Corporate Tax

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Corporations love keeping their shareholders money instead of contributing to society, and it’s the role of governments to ensure that corporations do their part. Usually this comes in the form of taxation. Multinational corporations create multiple subsidiaries to obfuscate and obstruct the ability of governments to collect tax, it’s the corporate equivalent of dining and dashing.

A recent G7 meeting revealed that the largest economies in the world are going to enact a global minimum taxation rate for corporations. Having an agreed-upon minimum will remove the incentive to corporations to create subsidiaries to avoid taxation, while increasing the wealth of nations.

The rules on making multinationals pay taxes where they operate – known as “pillar one” of the agreement – would apply to global companies with at least a 10% profit margin. 

Twenty percent of any profit above that would be reallocated and taxed in the countries where they operate, according to the G7 communiqué. 

In the case of the UK, for example, more tax revenue would be raised from large multinationals and would help pay for public services.

The second “pillar” of the agreement commits states to a global minimum corporate tax rate of 15% to avoid countries undercutting each other.

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