The G7 group of advanced economies has agreed to a ‘seismic’ two-pillar global deal to make multinational companies pay more tax...
Finance ministers meeting in London have agreed that large companies need to pay tax in the countries where they operate. That means companies pay more tax where they sell their products and services, rather than wherever they end up declaring their profits.
The rules would apply to global firms with at least a 10% profit margin – and would see 20% of any profit above the 10% margin reallocated and then subjected to tax in the countries where they do business.
Ministers also agreed to introduce a global minimum corporate tax rate of at least 15%, which should help to prevent countries from trying to undercut each other. The G7 believes this will create a more level playing field for firms and help crackdown on tax avoidance.
The current deal covers the US, UK, France, Germany, Canada, Italy, Japan, and the EU. The negotiations have taken many years to achieve and will now put pressure on the rest of the world to follow suit.
US Treasury Secretary Janet Yellen said the agreement will hopefully end the race to the bottom in corporate taxation. German finance minister Olaf Scholz felt it would “change the world”.
UK Chancellor of the Exchequer Rishi Sunak, who hosted the summit, said the agreement would make the global tax system finally "fit for the global digital age".