The G7 group of nations has proposed a minimum 15 per cent tax rate for multinational entities and the removal of digital services taxes.

The G7s members are Canada, France, Germany, Italy, Japan, the UK and the US, with the European Union participating as a guest. The Groups finance ministers and central bank governors met last week to discuss various matters, with their positions revealed in a post-meeting Communiqu with three items of note for the technology industry.

The first was a proposal to set a new globally minimum tax rate of 15 per cent, with that tax levied where revenue is made. The proposal is designed to end the financial contortions that see big tech companies make money from citizens of one nation but shift that revenue and any resulting profits to lower-taxing nations.

The results of these arrangements can be farcical, as shown by last weeks revelation that a Microsoft subsidiary in Ireland made profits of $314.73bn but paid no corporation tax because it is "resident" in Bermuda for tax purposes.

The second decision was abolition of digital services taxes, levies on digital services like video streaming that are notionally delivered from beyond a nations borders even though they are consumed -in-country. Digital services taxes were designed in part to ameliorate the effects of profit-shifting, so with the 15 per cent global tax in place they become less relevant.

The third item of interest was a re-statement of the G7s position that no global stablecoin project should begin operation until it adequately addresses relevant legal, regulatory, and oversight requirements through appropriate design and by adhering to applicable standards. The G7 nations want the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, to set rules for digital currencies before any non-state entities have a crack at disrupting money with efforts like Facebook's Libra. The statement also signals the G7 has an eye on China's Digital Yuan, and wants it integrated into a global framework.

The Organisation for Economic Co-operation and Development (OECD) endorsed the G7s stance.

Todays consensus among the G7 Finance Ministers, including on a minimum level of global taxation, is a landmark step toward the global consensus necessary to reform the international tax system, said secretary-general Matthias Cormann.

Thats important because while the G7 represents a big chunk of the global economy, their scheme wont be effective if other nations dont sign up. The G7s leaders will meet on June 11th and be joined by leaders of Australia, India, South Korea, and South Africa, with this new tax plan on the agenda. In July finance ministers of the G20 group will meet, and as theyve been working on similar tax measures its expected theyll consider and probably adopt the G7s proposal, which should mean that by years end most developed economies agree that big tech must be taxed more, in more places.

The G7s proposed 15 per cent tax rate is lower than company tax in many member nations, which has already lead to criticism it wont properly tackle profit-shifting.

Remember, too, that just last week the USA warned it believes that digital services taxes disproportionately affect its tech companies. Abolishing digital services taxes, which developing nations like Indonesia introduced with the explicit intent of broadening their tax base looks like a win for American companies at the expense of other nations.

The G7s proposal looks like a win for the USA, and maybe bad news for nations like Indonesia.

And then theres the fact that big tech companies have consistently defended their tax-shifting actions by stating theyre not illegal. The Register expects that tax havens that facilitated profit-shifting, and big techs lawyers and accountants, are already hard at work on new schemes that get around the G7 proposal.

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G7 nations aim for global 15 per cent tax on big tech and bin digital services taxes - The Register