G7 nations reach deal in London to tax big corporations

07 Jun '21

2 min read

Pic: Shutterstock

Nations belonging to the Group of Seven (G7) reached a deal last week to put the lid on cross-border tax loopholes that companies take advantage of worldwide. The Group said it would back a minimum global corporation tax rate of at least 15 per cent, and put in place measures to ensure taxes were paid in the countries where businesses operate.

Following two days of talks in London chaired by British chancellor of the treasury Rishi Sunak, counterparts agreed to reforms that will see multinationals paying tax in the countries where they do business, a press release from G7 said.

The accord’s target is to end a decades-long ‘race to the bottom’ in which countries have competed to attract corporate giants with ultra-low tax rates and exemptions. The trend has hit the public coffers of such countries and that shortfall now needs to be addressed to pay for reviving economies ravaged by the coronavirus pandemic. The accord could form the base of a global pact soon.

“We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20 per cent of profit exceeding a 10 per cent margin for the largest and most profitable multinational enterprises,” the deal’s text said.

The ministers also agreed to move towards making companies declare their environmental impact in a more standard way so investors can decided more easily whether to fund them.

“These seismic tax reforms are something the UK has been pushing for and a huge prize for the British taxpayer—creating a fairer tax system fit for the 21st century. This is a truly historic agreement and I’m proud the G7 has shown collective leadership at this crucial time in our global economic recovery,” Sunak said.

Fibre2Fashion News Desk (DS)

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