G-7 reaches historic deal on world's lowest corporate tax rate

On June 5, at a meeting of G-7 finance ministers in London, the Group of Seven (G-7) countries agreed on the framework of a global tax agreement that could give Europeans greater power over Facebook Inc. and Amazon.com Inc. and other U.S. tech giants to levy taxes and set a floor for global corporate tax rates. The general content of the agreement:

• Some of the largest global companies that will impact profit margins of at least 10%

• The G-7 also agreed to the principle of a minimum global corporate tax rate of at least 15% for large corporations

• A new nature-related financial disclosure task force will be established to address environmental crime

• First commitment to include climate change and biodiversity loss in decision-making

The deal aims to end a decades-long "race to the bottom" in which countries race to lure corporate giants with ultra-low tax rates and tax-free concessions.

It is widely believed that the purpose of setting the lowest global corporate tax rate is to prevent multinational companies from shifting profits to lower taxesl, to make them pay more in the countries where they operate, and to adapt systems to deal with trade in intangible assets such as data and information. For U.S. tech giants, they are expected to pay more in taxes in the countries where they operate. At the same time, this move could also generate more tax revenue for wealthy countries to make up for the economic damage to countries from the pandemic.