G7 finance ministers have agreed an ‘historic ’deal for a minimum corporate tax rate, which means the big tech companies will pay more tax.
Following the meeting in London, the G7 countries have said they will ensure they abide by a global minimum corporate tax rate of ‘at least 15%’. They believe this will create a more level playing field for firms and help crack down on tax avoidance.
It was also agreed that large companies need to pay tax in the countries where they do business. That means companies pay more tax where they sell their products and services, rather than where they put their HQs.
Following years of negotiation, the new two-pillar global deal covers the US, UK, France, Germany, Canada, Italy, Japan, and the EU.
UK Chancellor of the Exchequer Rishi Sunak, who hosted the summit, said the agreement would make the global tax system finally “fit for the global digital age”.
Janet Yellen, the US Treasury Secretary, said the agreement will hopefully end the race to bottom in corporate taxation. German finance minister Olaf Scholz felt it would “change the world”.
There are still some hurdles to overcome for the agreement to spread. The agreement now goes to the G20, which includes China, Brazil and Russia. The G7 will also be hoping the Organisation for Economic Co-operation and Development (OECD) which is also working on its own global tax rules, will also fall into line with the proposals.
The meeting also saw a move towards making climate disclosures mandatory. The finance ministers have backed the work of the International Financial Reporting Standards Foundation to develop a baseline global standard for high-quality, granular sustainability reporting, built on the Task Force on Climate-Related Financial Disclosures (TCFD) framework and work of sustainability standard-setters.
A taskforce on nature-related financial disclosures – to mirror the TCFD – was welcomed by the G7. Ministers agreed to crack down on the proceeds of environmental crimes by introducing and strengthening central company beneficial ownership registries. The UK was one of the first countries in the world to introduce a public beneficial ownership registry in 2016.
Making beneficial ownership public through these registries help law enforcement trace ill-gotten gains that are laundered through complex company structures, identify who ultimately owns or controls the company and bring the criminals to justice. And the increased transparency will also protect the UK and the rest of the G7 from other criminal threats – like corruption, fraud and terrorist financing.