Rishi hails ‘historic’ global tax that will hit tech giants
RISHI SUNAK praised a ‘historic’ decision yesterday by the G7 to agree a new global tax aimed at targeting online tech giants as a ‘huge prize for British taxpayers’.
To curb tax avoidance, companies making big profits will be required to pay tax in the countries where they do business.
The Chancellor also led talks in agreeing a minimum base for corporation tax of ‘at least 15 per cent’ to level the global playing field.
Following two days of talks in London with his G7 counterparts, Mr Sunak said the tax reforms were ‘seismic’.
The talks took place in Lancaster House, where the Netflix series The Crown is filmed.
A Treasury source said the venue was popular with G7 finance ministers because they were fans of the show, and before getting down to talks they took photographs of it.
The tax changes will ensure major corporations pay taxes in countries where they operate and not only where they have headquarters.
The policy is thought to be designed with online giants such as Amazon and Microsoft in mind, and it could raise about £500million a year for the UK.
Last week, the Chancellor revealed his plans for the tax reforms in an interview with The Mail on Sunday, saying: ‘The right companies aren’t paying the right tax in the right places. Fundamentally, the global tax system isn’t working… that’s not fair and that’s something that I want to fix.’
It is the first big announcement ahead of this week’s G7. Boris Johnson is due to meet US President Joe Biden in Cornwall for a bilateral meeting on Thursday.
Mr Sunak said he was ‘proud’ of his G7 colleagues for working together to produce a deal that ‘finally brings our global tax system into the 21st Century’.
He added: ‘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.’
Sir Nick Clegg, the former deputy Prime Minister turned Facebook’s vice president for global affairs, said the firm recognised the planned tax reforms could mean Facebook pays ‘more tax and in different places’.
The proposals will now be examined by the G20 financial ministers and central bank governors meeting in July.
The Treasury said: ‘The rules would apply to global firms with at least a ten per cent profit margin – and would see 20 per cent of any profit above the ten per cent margin reallocated and subjected to tax in the countries they operate [in].’
Treasury officials also said the decision to agree to a 15 per cent minimum corporation tax would create a ‘more level playing field for UK firms and crack down on tax avoidance’. However, the change could cause tensions with Dublin as Ireland’s corporation tax rate is 12.5 per cent.
In his March Budget, Mr Sunak said UK corporation tax would rise from 19 per cent to 25 per cent by 2023 in an attempt to repair the public finances post-Covid.
The Confederation of British Industry welcomed the announcement, adding: ‘Finding agreement on international tax at the G7 is no mean feat and will light the touchpaper for the wider multilateral process. Businesses will continue to work hard to move the process forward and achieve a global tax system fit for the 21st Century.’ However, others said the 15 per cent rate was too low. Shadow chancellor Rachel Reeves said: ‘This Government has spent the last few weeks actively watering down what was initially intended to be an ambitious 21 per cent rate of global minimum corporate tax.
‘That would have brought £131 million extra a week to Britain for our NHS and other public services.’
The charity Oxfam said: ‘It’s about time some of the world’s most powerful economies force multinational corporations to pay their fair share of tax. However, fixing a global minimum corporate tax rate of just 15 per cent is far too low.
‘It will do little to end the damaging race to the bottom on corporate tax and curtail the widespread use of tax havens.’