G7 agrees to avoid higher taxes for US and UK companies

By Harshita Meenaktshi, Bipasha Dey and Promit Mukherjee

(Reuters) -The United States and the Group of Seven nations have agreed to support a proposal that would exempt U.S. companies from some components of an existing global agreement, the G7 said in a statement on Saturday.

The group has created a 'side-by-side' system in response to the U.S. administration agreeing to scrap the Section 899 retaliatory tax proposal from President Donald Trump's tax and spending bill, it said in a statement from Canada, the head of the rolling G7 presidency.

The G7 said the plan recognizes existing U.S. minimum tax laws and aims to bring more stability to the international tax system.

UK businesses are also spared higher taxes after the removal of Section 899 from President Donald Trump's tax and spending bill.

Britain said businesses would benefit from greater certainty and stability following the agreement. Some British businesses had in recent weeks said they were worried about paying substantial additional tax due to the inclusion of Section 899, which has now been removed.

"Today's agreement provides much-needed certainty and stability for those businesses after they had raised their concerns," finance minister Rachel Reeves said in a statement, adding that more work was need to tackle aggressive tax planning and avoidance.

G7 officials said that they look forward to discussing a solution that is "acceptable and implementable to all".

In January, through an executive order, Trump declared that the global corporate minimum tax deal was not applicable in the U.S., effectively pulling out of the landmark 2021 arrangement negotiated by the Biden administration with nearly 140 countries.

He had also vowed to impose a retaliatory tax against countries that impose taxes on U.S. firms under the 2021 global tax agreement. This tax was considered detrimental to many foreign companies operating in the U.S.

(Reporting by Bipasha Dey, Harshita Meenaktshi, Promit Mukherjee and Sarah Young; editing by Diane Craft, Will Dunham and Chizu Nomiyama)