Rishi Sunak has announced an ‘historic’ G7 agreement on the amount of tax global companies must pay and issued a tax haven crackdown warning.
The Chancellor said the tax reform setting the minimum threshold 15% would target large digital companies and create a more ‘fair’ playing field for UK taxpayers.
The G7 said it would back the minimum rate and introduce measures to ensure taxes were paid in the countries where businesses operate.
Mr Sunak did not directly name the targets of the higher global corporation tax – but it comes amid pressure for governments to claim a ‘fair share’ for domestic taxpayers from giants including Amazon.
Wealthy nations have struggled for years to agree a way to raise more revenue from the large multinational, along with Google and Facebook, which often book their profits in jurisdictions where they can pay little or no tax.
However Mr Sunak also defended the decision not to push for a rate at the meeting with G7 finance ministers after US President Joe Biden had initially argued it should be 21%.
Last month MPs voted down a Labour amendment to the Government’s Finance Bill that would have forced Mr Sunak to publish a review within six months on how a global minimum rate of 21% or 25% would affect the taxpayer – and assess its impact on “tax avoidance and evasion”.
Speaking after a meeting of G7 finance ministers in London, Mr Sunak said: “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 and that’s a huge prize for British taxpayers.”
Addressing questions on Mr Biden’s push for a higher tax figure, Mr Sunak told broadcasters: “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.”
The G7 leaders from the US, UK, France, Germany, Japan, Canada and Italy met at Lancaster House in London today, ahead of the full summit in Cornwall next weekend.
The group will discuss measures to tackle climate change as well as efforts to secure an international agreement on how digital companies are taxed.