This Friday, finance ministers from the G7 nations will meet in London for a two-day meeting which may move stocks, especially big tech companies. Known as The Group of Seven, the G7 is an intergovernmental organization consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States (it became the G8 when it added Russia only to suspend the nation for, well, being Russia).
Chaired by British finance minister Rishi Sunak, this will be the first face-to-face meeting since the pandemic. At the center of the two day meeting will be a focus on global tax reform in an effort to prevent big companies from evading domestic taxes by essentially pretending to be headquartered in the Cayman Islands or some other tax haven.
The Biden administration has vowed to crack down on such practices, and the only way to ensure that the nation is able to fill the federal coffers with tax dollars from these big U.S. companies is to get the world to sign on to global tax reform. (The U.S. is proposing a minimum global corporate tax of at least 15%). European countries want all U.S. tech giants covered.
Multinational companies such as Facebook (Nasdaq: FB), Google (Nasdaq: GOOGL), and Amazon (Nasdaq: AMZN), to name a few, have historically been able to bank and book their profits in jurisdictions where they can pay little or sometimes even no tax—and rich nations including the U.S. are just about fed up. These nations are looking to enforce companies to pay taxes in the countries where they make sales, not just where they are "headquartered.”
"We cannot continue to rely on a tax system that was largely designed in the 1920s," Mr. Sunak said at the meeting. "And I will just say this: the world has noticed. And I believe they have high expectations for what we all can agree over the coming days."
And there seems to be agreement in principle. In a joint letter on Friday, finance ministers from Germany, France, Spain, and Italy wrote that they would "commit to defining a common position on a new international tax system at the G7 Finance Ministers meeting in London."
However, while a deal seems imminent, there is still a lot of negotiation to be done on a specific tax rate and other items such as digital services taxes and tariffs about which there is much disagreement.