Sunday, June 6, 2021
G7 Finance Ministers & Central Bank Governors Communiqué (June 5, 2021):
Shaping a Safe and Prosperous Future for All
16. We strongly support the efforts underway through the G20/OECD Inclusive Framework to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax. We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises. We will provide for appropriate coordination between the application of the new international tax rules and the removal of all Digital Services Taxes, and other relevant similar measures, on all companies. We also commit to a global minimum tax of at least 15% on a country by country basis. We agree on the importance of progressing agreement in parallel on both Pillars and look forward to reaching an agreement at the July meeting of G20 Finance Ministers and Central Bank Governors.
G7 Finance Ministers Agree [On] Historic Global Tax Agreement:
- G7 Finance ministers strike seismic agreement on global tax reform that will mean the largest multinational tech giants will pay their fair share of tax in the countries in which they operate.
- Following two-days of talks chaired by Chancellor Rishi Sunak in London, counterparts agree to reforms which will see multinationals paying tax in the countries where they do business;
- As part of landmark deal, finance ministers also agree to the principle of a global minimum rate that ensures multinationals pay tax of at least 15% in each country they operate ...
Global Tax Reform:
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.
Under Pillar One of this historic agreement, 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.
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 they operate.
The fairer system will mean the UK will raise more tax revenue from large multinationals and help pay for public services here in the UK.
Under Pillar Two, the G7 also agreed to the principle of at least 15% global minimum corporation tax operated on a country by country basis, creating a more level playing field for UK firms and cracking down on tax avoidance.
Discussions on the two Pillars have been ongoing for many years – with the Chancellor making securing a global agreement a key priority of the UK’s G7 Presidency. The agreement will now be discussed in further detail at the G20 Financial Ministers & Central Bank Governors meeting in July.
(Hat Tip: Ted Seto)