Ottawa [Canada], June 29: The Group of Seven (G7) developed economies on June 28 agreed to propose a global minimum tax exemption for US multinational companies.
In a statement on June 28, Canada, the rotating G7 chair, made it clear that the above proposal would help American multinational companies avoid paying taxes when operating in other countries, AFP reported.
Canada said the G7 deal was partly due to "recently proposed changes to the US international tax system", related to a sweeping tax bill being debated in the US Congress.
Nearly 140 countries have reached an agreement in 2021 to tax multinational companies. The agreement, negotiated under the auspices of the Organization for Economic Cooperation and Development ( OECD ), will require multinational companies to pay a minimum of 15% tax in their home countries. US President Donald Trump has criticized the tax agreement.
Despite being given the green light by the G7, the proposal to exempt US multinationals from taxes still has to wait for a decision from the OECD.
The G7 has created a mechanism called the "parallel system". Accordingly, the G7 wants international support to abolish the global minimum tax for US multinationals. In return, the US will abolish Section 899 in the tax bill that is being hotly debated in the US Congress .
Section 899, also known as the retaliatory tax, states that foreign companies operating in the US will have to pay a tax of up to 20% if their headquarters are located in countries that the US considers to have "unfair foreign tax rates".
Business lobby groups in the US are concerned that taxing foreign companies under Section 899 will discourage businesses from investing in the US, possibly leading to job cuts, according to The New York Times . The tax bill submitted to the US Senate on June 28 removed Section 899. If the Senate passes it, the bill will be sent to the House of Representatives for a vote, before being sent to US President Donald Trump for his signature.
Source: Thanh Nien Newspaper
