G7: Chancellor hails agreement to make big firms pay 'fair share' of tax

5 June 2021, 12:19 | Updated: 5 June 2021, 17:09

Chancellor Rishi Sunak has hailed a "historic" agreement reached at a G7 meeting to reform the global tax system to make sure big tech firms pay a fair share of domestic taxes.

He said an agreement had been made to make the "right companies pay the right tax in the right places."

Finance ministers have agreed to commit to the principle of a minimum corporate tax rate of 15%. It could send billions of dollars in taxes to governments to pay off debts incurred during the Covid crisis.

Tech firms like Amazon and Google could be among the companies hit by the agreement.

Speaking after a meeting of G7 finance ministers in London, Mr Sunak said: "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 and that's a huge prize for British taxpayers."

He defended the decision not to push for a higher global corporation tax rate at the meeting with G7 finance ministers after US President Joe Biden had initially argued it should be 21%.

Rishi Sunak told broadcasters in London: "I would say a couple of things. First of all, the agreement reached here today says at least 15% and secondly, it is worth taking a step back.

"This is something that has been talked about for almost a decade.

"And here for the first time today we actually have agreement on the tangible principles of what these reforms should look like and that is huge progress."

Asked whether he was tying his own hands by having a minimum rate, Mr Sunak replied: "I think what the British public want to know is that the tax system is fair, they want to know that there is a level-playing field - whether people are operating in tax havens or whether large, particularly online businesses, are able to not pay tax in the right places, they want that tackled.

"And that's what this agreement gives us the ability to do and it has been agreed among G7 colleagues and once we broaden it out and implement it globally, it is a huge prize for British taxpayers."

A Treasury spokeswoman said: "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 and Central Bank governors meeting in July."