Britain's Chancellor of the Exchequer Rishi Sunak speaks at a meeting of finance ministers from across the G7 nations ahead of the G7 leaders

Explainer: What is a global minimum tax and what will it mean?

submited by

Style Pass

2021-06-05 13:00:08

Britain's Chancellor of the Exchequer Rishi Sunak speaks at a meeting of finance ministers from across the G7 nations ahead of the G7 leaders' summit, at Lancaster House in London, Britain June 4, 2021. Stefan Rousseau/PA Wire/Pool via REUTERS

Finance Ministers from the Group of Seven (G7) rich nations reached a landmark accord on Saturday backing the creation of a global minimum corporate tax rate of at least 15%, an agreement that could then form the basis of a worldwide deal. read more

Such a deal aims to end what U.S. Treasury Secretary Janet Yellen has called a "30-year race to the bottom on corporate tax rates" as countries compete to lure multinationals.

Major economies are aiming to discourage multinationals from shifting profits - and tax revenues - to low-tax countries regardless of where their sales are made.

Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.