Ahead of their annual summit, leaders of the world’s most wealthy and influential countries met to discuss new plans to tackle tax avoidance amongst large multinational conglomerates. During their meet World Leaders made history by signing a landmark deal designed to tackle tax and establish a minimum global corporation tax. The main goal of the new rate being to deter large multinational corporations from stashing revenue in low-rate countries and overall avoiding taxes.
Finance ministers collectively agreed on a minimum tax rate of 15% from Multinationals, to be taxed in each country they operate in. This rate was agreed upon to help make the tax reform widely acceptable to a larger group of countries.
Critics have previously condemned the G7 for letting multinationals ‘off the hook’ with a reduced tax rate that did not prevent tax havens, therefore, undermining countries with higher tax rates. This new agreement is set to reverse previous policies that have allowed multinationals to play countries against each other in order to drive down the level of tax they pay and is designed to force the world’s biggest companies to pay more in tax in countries where they do business, as well as where they are headquartered. The agreement is designed to include both physical businesses and digital businesses, such as Amazon, Google, and Facebook in its midst.
G7 leaders hope the agreement will be endorsed by the G20 group of nations, which includes China, Russia, South Africa, and Saudi Arabia, later in the year. More than 130 countries are participating in a parallel exercise to agree on a global tax framework, as part of a deal put together by the Organisation for Economic Cooperation and Development (OECD), which is expected to organise similar reforms on multinational taxes at meetings later this year, in October.
Chancellor of the Exchequer, Rishi Sunak said on the matter: “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.”
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