Why US urges G7 economies to quickly implement global tax reform

*The American Treasury expresses support for ongoing efforts at improving the international tax system, which is aimed at stopping transnational companies from shifting their profits to jurisdictions with lower tax rates

Alexander Davis | ConsumerConnect

The United States (US) Treasury has urged countries in the G7 group of richest countries in the world to rapidly implement a global tax reform aimed at curbing tax avoidance.

Janet Yellen, US Treasury Secretary in a recent statement, following the G7 Finance Ministers’ virtual meeting, noted that the proposal announced June this year would impose a 15 percent minimum corporate tax globally.

ConsumerConnect reports the G7 is an informal grouping of seven of the world’s advanced economies: Canada, France, Germany, Italy, Japan, the United Kingdom (UK), the United States (US) and the European Union (EU).

It was gathered the measure is aimed at stopping companies from shifting their profits to jurisdictions with lower tax rates.

The Treasury stated the G20 Finance Ministers backed the deal July, followed by 134 Organisation for Economic Cooperation and Development (OECD) member countries, representing over 90 percent of the world’s GDP, agency report said.

The American Treasury said: “Secretary Yellen today (Thursday, September 9, 2021) expressed support for ongoing efforts to improve the international tax system and the importance of swift implementation of the new system.”

However, the reform has been opposed by Ireland, which is not part of the G7 and a favourite headquarters location for companies, particularly US tech and pharmaceutical giants, who prefer their lower 12.5 percent tax rate.

The United States as well is working on a reform targeting companies that benefit from tax havens, with the objective of making these companies pay a minimum of 21 percent tax regardless of the rate in the country where their profits are declared.

Yellen stated: “Together with the global deal, this policy will generate funding for a sustained increase in critical investments in education, research, and clean energy — which will improve the lives of US citizens and help the US remain the best place in the world to do business.”