June 11, 2021
After years of work and effort, the G-7 countries have agreed to support a global minimum tax rate to prevent large multinational companies from evading corporate income tax in their local countries. The G-7, which includes Canada, France, Germany, Italy, Japan, the UK, and the US, agreed to a new corporate minimum of 15%. Companies like Amazon, Facebook, and Google could face additional taxes based on where their goods are sold. This is an aim to end the race to the bottom where countries lower their corporate tax rate to draw offices and commerce from multinational firms. The Biden administration was eager to seal the deal on the minimum tax rate because it's part of its new tax strategies that raise the corporate tax rate to 28%. The deal could push business and development out of their home nations to countries that haven’t agreed to the minimum tax. Finalizing the deal was difficult because countries wanted what they considered to be fair provisions to their tax structure.
FINSUM + Magnifi: Biden’s tax plan has caused an investment frenzy already, this will only amplify the concerns from markets because the implementation of this plan would immediately lower expected earnings for some of the largest S&P 500 constituents.
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