EconomyG7 2020: key takeaways from finance ministers in London

G7 2020: key takeaways from finance ministers in London

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London, United Kingdom: The finance ministers of the G7 wealthy nations in a “historic” commitment Saturday agreed to impose a global minimum tax on large corporations such as tech giants.

They also made commitments on disclosure of climate impact, support for poorer countries, and post-pandemic recovery.

Here are the main points of the statement released at the end of the two-day meeting.

The minimum tax rate for giants 

The main point of the meeting between the ministers from the G7 —  Britain, France, Italy, Canada, Japan, Germany, and the United States — was to agree on a minimum corporate tax of 15 percent for the largest and most profitable multinationals. It will have to be paid in every country they operate in.

The idea is that such companies, including tech giants, should pay taxes where they earn their profits, not just where they are headquartered, which currently is often in countries with low taxes.

The measure is particularly aimed at the digital economy and US tech companies which have profited enormously during the pandemic.

The statement does not make it clear whether countries that already have a tax on digital services, such as the UK, will now drop these once the tax reform is implemented.

But British finance minister Rishi Sunak said after the meeting that the UK’s digital services tax would be removed.

While the ministers made a landmark commitment, the reforms are not yet finalized and the G7 finance chiefs will push for an agreement at a meeting of the broader G20 in Italy in July.

Climate risks 

The ministers also discussed making companies disclose their impact on climate change to investors. This comes as the G7 summit in Cornwall next week will focus on tackling climate change.

The G7 finance ministers supported “moving towards mandatory climate-related financial disclosures”, agreeing that investors need “high quality” and reliable information on companies’ exposure to climate risk, which is currently done on a voluntary basis.

Also read | G7 nations reach ‘historic’ agreement over global corporate tax

This would particularly concern companies’ transition to clean energy.

The COP26 global climate summit to be held in Scotland in November could agree on a global framework on this.

Support for poor countries 

The G7 countries said they were determined to help “low-income and vulnerable countries” dealing with the coronavirus pandemic.

They supported the allocation of $650 billion of special drawing rights to help these countries. These are international reserve assets created by the International Monetary Fund that provide these countries with extra liquidity.

The ministers also urged the World Bank to step up its efforts and use of its “financial firepower” to improve vaccine access for developing countries, including through the Covax scheme.

Global economic recovery 

The statement says G7 members will continue to support their economies to recover as they reopen from Covid-related lockdowns.

“Once the recovery is firmly established, we need to ensure the long-term sustainability of public finances to enable us to respond to future crises,” it said.

The pandemic can be overcome only when it is under control everywhere, requiring equitable access to vaccines and tests, the statement added.

The G7 health ministers on Friday committed to sharing their vaccine doses through Covax “when domestic situations permit”.

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