The Finance Ministers of the group of 7 advanced economies of the world, G7, passed a landmark agreement that was long pending since the League of Nations 1920. In the G7 meeting hosted by the U.K. in London last weekend, nations reached a universal tax deal, fixing the corporate tax at a minimum of 15% globally.
The increasing influence and power of the behemoths like Facebook, Google, Amazon, Apple, and others are no longer just a distant threat. Global leaders are increasingly growing weary of the financial and political bandwidth of these multinational giants that despite boasting of billion to trillion dollars in market cap, still exploit loopholes in tax order to avoid taxes.
A New Global Tax Order In Shaping
The minimum corporate tax rate will eliminate the biggest hurdle in keeping these business organizations in check- the competition among countries to attract these MNCs. Countries like Ireland and Switzerland have gradually become the tax haven for these organizations, levying a mere 12.5% and 14.9% tax on corporate earnings, respectively. The new tax order is said to eliminate the roadblocks between the efforts of first-world countries that are aggressively working towards weakening corporate supremacy.
Another significant agreement also accompanied this global corporate tax deal- corporates will also pay taxes in the countries where they operate and not just in the headquartered nation.
However, the agreements on global tax deals will still take a few years to be sanctioned into law. Therefore, from the G7 agreement, the next stop of the proposed tax order will be forwarded to the G20, including Brazil, Russia, and China.
So what exactly is the G7 organization, and what are its history and future? Let’s find out.
What is G7?
G7 is a group of the seven largest economies of the world that include Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The annual G7 Summit brings together the heads of government of the member states and representatives from the European Union.
Russian joined the group in 1998, making it a G8. However, it was expelled from the organization in 2014 due to its annexation of Crimea. This was the year the country under Putin’s leadership was ready to host Summit. The leaders from the other 7 nations refused to attend the meeting and ousted Russia from the group.
Why was the G7 formed?
The origin of the G7 can be traced back to the second half of the 20th century that witnessed the oil embargo of OPEC nations and the financial crisis that followed.
Initially, the Group of Six was founded in 1975 by France, Italy, Japan, the United Kingdom, the United States, and West Germany to bring noncommunist governments together to discuss economic difficulties, including inflation and recession and OPEC oil distress.
The next year, Canada became a member. Russia eventually joined in 1998, and its admission was intended as a gesture of East-West collaboration following the collapse of the Soviet Union in 1991.
Because the G7 is an informal group that doesn’t make binding decisions, the leaders’ declarations at the end of the summit aren’t legally binding.
What really is the distinction between the G7 and the G20?
The major distinction between the two groups remains that of agenda. The G7 is mostly concerned with geopolitics, whereas the G20 is concerned with the economy and money. The latter is also known as the “Summit on Financial Markets and the World Economy,” and it accounts for almost 80% of global GDP.
The members of G20 are Argentina, Australia, Brazil, Canada, China, Germany, France, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union.
When is the G7 summit 2021?
Leaders from all the advanced nations and economies will meet in Cornwall for the 47th annual G7 Summit this Friday, June 11, 2021. It will end on June 13.
The summit will be attended by US President Joe Biden, German Chancellor Angela Merkel, Japanese Prime Minister Yoshihide Suga, Canadian Prime Minister Justin Trudeau, and Italian Prime Minister Mario Draghi.
The United States, Japan, and Italy leaders will meet for the first time at the G7 Summit.
Guests from various countries are invited to attend the conference each year. President Johnson has invited heads of state from Australia, India, South Korea, and South Africa to attend this year’s summit. The 11 presidents and prime ministers represent more than 60% of the world’s population (almost 2.2 billion people) living in democracies.
Economic, environmental, health, trade, technology, development, and foreign policy topics will be covered by seven Ministerial Tracks. In addition, six G7 Engagement Groups will provide advice on topics such as youth, women, science, civil society, business, and labor.
Why is China not the part of G7?
For seemingly right reasons, one would argue why China has been excluded from the group of the world’s 7 biggest economies given the fact that it will soon be the world’s ‘the’ biggest economy. The answer is, despite being one of the biggest economies, the country’s per capita income remains strikingly lower than the other nations in the group.
Therefore, China is not called an advanced economy.