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G7 Nations Reach Landmark Deal on Global Minimum Tax and Pillar 2

 June 29, 2025 Taking another big step towards global tax reform, the G7 countries have agreed on the implementation of Global Minimum Tax and Pillar-2. This decision was formally announced by HM Treasury (UK Finance Ministry) on Saturday and is being considered an important step towards making the international tax system more equitable and transparent.


Major initiative towards preventing global tax evasion

The main objective of this decision is to ensure that the world's big multinational companies have to pay at least 15% effective tax rate in any country where they do business. This will stop the tendency of companies to save tax by shifting profits to low tax countries and will increase tax collection at the global level.

America's controversial provision "Section 899" removed

The most important part of this agreement, especially for Britain, is the removal of Section 899 from America's proposed "One Big Beautiful Bill". This section was giving rise to the threat of anticipated retaliatory taxes on UK and other non-US companies, which could have severely affected global trade and investment.

UK companies and investors had raised concerns about this provision with HM Treasury. There was a fear of trade uncertainty and decline in foreign investment due to this provision. But now they have got relief with its removal.

America and Pillar-2: Steps towards harmonization

Under this new agreement, the US and other G7 countries have agreed that the US minimum tax structure and Pillar-2 can work together in parallel. This will reduce the risk of unhealthy competition and artificial profit shifting.

UK Chancellor and US Treasury Secretary Scott Bessent played an important role in this effort, who together helped in resolving technical and policy related objections.

G7 Reiterates Resolution

The G7 countries — Canada, France, Germany, Italy, Japan, the United Kingdom and the United States — have made it clear through this decision that they are committed to implementing a fair tax system globally, so that no multinational company can take unfair advantage of the rules to avoid taxes.

Way Forward: Negotiations continue under G20/OECD

While this agreement is a historic achievement at the G7 level, detailed negotiations will still continue with more than 140 countries under the G20/OECD Inclusive Framework. In particular, the removal of controversial proposals brought by big countries like the US — such as Section 899 — is considered extremely important for building a global consensus in the future.

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