G7 strikes ‘historic’ deal to reform global tax system | 5 key aspects

The Group of Seven (G7) wealthy countries on Saturday agreed on the outline of a historic deal to deter multinational companies from avoiding taxes stashing profits in low-rate countries. The foreign ministers and central bank governors of the G7 met in London for two days of talks, chaired by the UK Chancellor of the Exchequer Rishi Sunak. The United Kingdom holds the rotating presidency for the G7 Leaders’ Summit in 2021.

The UK treasury department, known as HM Treasury, said in a statement that the agreement among the G7 countries on global tax reform delivers on Sunak’s promise for “big international companies to start paying their fair share.” After the G7 countries agreed on the key pact, Sunak, in a video address, thanked his G7 counterparts “for their willingness to work together…to strike a deal of historic significance that finally brings the global tax system into the 21st century.”

“I am delighted to announce that G7 finance ministers today, after years of discussions, have reached a historic agreement to reform the global tax system to make it fit for the global digital age and, crucially, to make sure it’s fair. So that the right companies pay the right tax in the right places. And that’s a huge prize for British taxpayers,” said Sunak.

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Here are the five key aspects of the ‘historic’ deal:

• The G7 finance ministers agreed to reforms that will see multinationals paying tax in the countries where they do business.
• The largest global firms with profit margins of at least 10 per cent will be in the scope of the landmark reforms.
• 20 per cent of any profit above that 10 per cent margin will be reallocated and then subjected to tax in the countries where they make sales.
• The G7 also agreed to support a global minimum corporate tax rate of at least 15 per cent on large firms in each country they operate, creating a more “level playing field and cracking down on tax avoidance.”
• As per the HM Treasury, the Group of Seven countries have also agreed to follow the UK lead in making climate reporting mandatory, and crack down on the proceeds of environmental crimes.