Rishi Sunak hails 'historic' G7 Global Tax Agreement

Rishi Sunak hails 'historic' G7 Global Tax Agreement

Under Pillar One, the largest and most profitable multinationals will be required to pay tax in the countries where they operate - and not just where they have their headquarters.

Finance ministers from wealthy G7 nations on Saturday endorsed a global minimum corporate tax of at least 15 percent, rallying behind a US-backed plan targeting tech giants and other multinationals accused of not paying enough.

In a press conference on Saturday from London, she said members of the G-7 agreed "the post-pandemic world must be fairer, especially with regard to global taxation".

The fairer system will mean the United Kingdom will raise more tax revenue from large multinationals and help pay for public services here in the UK.

Japanese Finance Minister Taro Aso said on Monday that he did not expect agreement this week on a specific minimum tax rate.

Finance ministers from the Group of Seven are meeting in person for the first time since the start of the COVID pandemic, after U.S. President Joe Biden's administration gave fresh impetus to stalled global tax talks this year.

Biden has called for a unified minimum corporate tax rate of 15 percent in negotiations with the Organisation for Economic Co-operation and Development (OECD) and G20.

Britain said talks on tax policy had been productive but differences remained.

The G-7 statement echoes a US proposal to simply let countries tax part of the earnings of the largest and most profitable companies - digital or not - if they are doing business within their borders. It also supported awarding countries the right to tax 20% or more of profit exceeding a 10% profit margin. The UK and France are two nations that have planned a digital services tax on technology giants.

A particular focus of the minimum tax rate are the big global tech firms like Amazon, Facebook and Google parent Alphabet, which are adept at exploiting the differences in varying corporate tax codes.

But Britain, which has overseas tax haven territories, and Ireland, which sets its effective corporate tax rate at a relatively low 12.5 percent to attract companies, had yet to back the 15 percent proposal before the meeting, the sources said. That would deter the practice of using accounting schemes to shift profits to a few very low-tax countries.

US Treasury Secretary Janet Yellen hailed the "unprecedented commitment", saying in a statement that a global minimum tax "would end the race to the bottom in corporate taxation".

According to an analysis by the Institute on Taxation and Economic Policy, a left-leaning nonprofit tax policy organization, at least 55 of the largest corporations paid no federal corporate income in the most recent fiscal year.

The agreement is due to be pored over in further detail at the G20 financial ministers and Central Bank governors meeting in July, the Treasury confirmed.

"We want the worldwide tax reform process to succeed and recognise this could mean Facebook paying more tax, and in different places".

But pro-free market think tank the Adam Smith Institute said Mr Sunak had effectively tied his own hands while handing "power over our taxes to Washington's demands".

During the meeting, Finance Ministers agreed the principles of an ambitious two Pillar global solution to tackle the tax challenges arising from an increasingly globalised and digital global economy.

"We are just one millimetre away from a historic agreement", French Finance Minister Bruno Le Maire told the BBC. "France can be proud!"

The meeting of finance ministers came ahead of an annual summit of G-7 leaders scheduled for June 11-13 in Carbis Bay, Cornwall.

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