An agreement by wealthy countries to impose minimum taxes on multinational companies faces a rocky path to implementation, with many governments likely to wait and see what others, especially a divided U.S. Congress, will do.
Treasury Secretary Janet Yellen hailed the deal, reached by finance ministers of the Group of Seven leading nations over the weekend in London. She called it a return to multilateralism and a sign that countries can tighten the tax net on profitable firms to fund their governments.
The agreement represents a turning point in long-running negotiations over where and how corporate profits should be taxed. The deal would impose a minimum tax of at least 15% and give countries more authority to tax the profits of digital companies like Apple Inc. and Facebook Inc. that dominate global markets but pay relatively little tax in many countries where they operate.
While the impact on tech companies remains uncertain, some welcomed the prospect of a more uniform global regime. Nick Clegg, Facebook Inc.’s vice president of global affairs, said on Twitter that the deal is a “step toward certainty for businesses” when it comes to taxes.
New tests come in the months ahead, as details get hashed out and governments see which country goes first. Those that move ahead before others could damage their revenue bases and companies, according to tax experts, and those lagging behind a global consensus could be hurt too.