Rishi Sunak hails ‘historic’ breakthrough as G7 ministers agree global tech tax deal
Rishi Sunak has announced a historic crackdown on big tech tax avoidance after thrashing out a deal with finance ministers from across the G7.
The chancellor, who is the host of this stage of the G7 summit at Lancaster House, said the tax overhaul was a “huge prize for British taxpayers – creating a fairer tax system for the 21st century”.
Speaking after a meeting of G7 finance ministers in London, the Chancellor said: “I am delighted to announce that today after years of discussion G7 finance ministers have reached a historic agreement to reform the global tax system.
“To make it fit for the global digital age, but crucially to make sure that it is fair so that the right companies pay the right tax in the right places and that’s a huge prize for British taxpayers.”
The reforms are set to affect major global firms, particularly big tech companies, with profit margins of at least 10pc and will mean that 20pc of any profit above the 10pc margin reallocated and then subjected to tax in the countries where they make sales.
The G7 also agreed to the principle of a global minimum corporation tax on large firms of at least 15pc operated on a country-by-country basis, a step Mr Sunak said would “create a more level playing field for UK firms and cracking down on tax avoidance”.
Although the deal may not have gone as far as some hoped – President Biden has been calling for a global minimum threshold for corporation tax set at between 15pc and 21pc to stop companies shifting their profits to havens around the world – it marks the biggest overhaul of international tax rules for decades, with the current system drawn up in the pre-digital age.
The Treasury said it addresses the tax challenges arising “from an increasingly globalised and digital global economy”.
Arguments have blown up in recent years as nations including the UK have gone it alone to levy digital services taxes, taking a slice of the revenues of the major businesses including search engines, social media sites and online marketplaces.
The agreement, thrashed out among G7 leaders in their first face-to-face meetings as a group since 2019, will be discussed in further detail in July.
The G7 gathering represents a key test of Britain’s post-Brexit diplomatic clout and is being billed as a crucial moment for the future of relations between governments and business worldwide.
Before this deal was agreed Treasury officials had been concerned that major US businesses will book all their profits in America once the rules are changed, regardless of where they sell goods and services – potentially depriving the Exchequer of billions of pounds of revenue.