The G7 countries on Friday formally approved a global minimum corporate tax rate of 15 per cent. This means that multinational companies like Google, Facebook, Apple and others must pay this minimum tax in every country in which they make money. A worldwide tax would require the approval of the G-20 and the EU parliament.
Major US stock indices are showing slight gains before markets open on Monday, despite the G7 countries (USA, Japan, Germany, UK, France, Italy, Canada) adopting a global minimum tax rate of 15% for corporations on Friday.
The S&P 500 index rose 0.17%, the Dow Jones rose 0.17% and the Nasdaq 100 rose 0.22% respectively. Shares in technology companies Facebook (FB) and Google (GOOG) were also up slightly, while Amazon (AMZN) was down 0.08% before the start of trading on Monday.
The slight stock market reaction indicates that investors are likely to expect a long time between the intentions of adopting a global minimum corporate tax and its actual implementation. Experts say it will take several months to a year or more.
Some countries in Europe, like France, the UK, Italy, Austria and Portugal, as well as Canada, have already imposed or are long planning to impose digital taxes so that US internet giants and other digital services companies will pay taxes on revenues generated by consumers in those countries.
At the same time, for offshore countries, which receive a significant share of government revenues through favourable tax treatment, a mandatory minimum corporate tax of 15% could mean lower revenues.
Many criticise such a G7 decision because the COVID-19 pandemic has hit the global economy and a tax increase would slow recovery.
Moreover, Biden, and the G7 leaders want to offer low-income countries a new programme of financing from the International Monetary Fund (IMF) that will include special drawing rights and help to buy vaccines against Covid, to help their economies recover more quickly.