NEW: Biden and G-7 leaders will endorse a global minimum corporate tax of at least 15% on Friday. They will also back a new tax linked to the places where companies actually make money, rather than where they are headquartered.
WASHINGTON — President Joe Biden and leaders of the G-7 group of nations will publicly endorse a global minimum corporate tax of at least 15% on Friday, one piece of a broader agreement to update international tax laws for a globalized, digital economy.
The leaders will also announce a plan to replace Digital Services Taxes, which targeted the biggest American tech companies, with a new tax plan linked to the places where multinationals are actually doing business, rather than where they are headquartered.
For the Biden administration, the Global Minimum Tax plan represents a concrete step towards its goal of creating what it calls a "foreign policy for the middle class."
This strategy aims to ensure that globalization and trade are harnessed for the benefit of working Americans, and not merely for billionaires and multinational corporations.
For the rest of the world, the GMT is intended to end the tax cutting arms race that has led some countries to cut their corporate taxes much lower than others, in order to attract multinational companies.
If widely enacted, the GMT would effectively end the practice of global corporations seeking out low-tax jurisdictions like Ireland and the British Virgin Islands to move their headquarters to, even though their customers, operations and executives are located elsewhere.
The second major initiative Biden and G-7 leaders will announce Friday is a plan they are "actively considering" to expand the International Monetary Funds supply of Special Drawing Rights, an internal IMF currency, that are available to low-income countries.
This plan is aimed at expanding international development financing to poor countries and helping them to purchase Covid vaccines and recover more quickly from the pandemics effects, according to a White House fact sheet.
The White House also said G-7 leaders will agree to "continue providing policy support to the global economy for as long as necessary to create a strong, balanced, and inclusive economic recovery."
The G-7 tax agreement "will serve as a springboard to getting broader agreement at the G-20," said a senior administration official, who spoke to reporters on background in order to discuss ongoing talks.
A joint statement issued Thursday by Biden and British Prime Minister Boris Johnson offers a preview of what to expect from the global tax agreement between the G-7 partner nations.
"We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises," the statement says.