- G7 finance ministers strike a seismic deal on global tax reform that means the biggest multinational tech giants will pay their fair share of tax in the countries in which they operate.
- After two days of talks chaired by Chancellor Rishi Sunak in London, counterparts agree to reforms that will see multinationals paying taxes in the countries where they do business;
- In a historic deal, finance ministers also agree to the principle of a global minimum rate ensuring that multinationals pay a tax of at least 15% in each country where they operate;
- Nations also agree to follow the UK’s lead in making climate reporting mandatory and agree to action to crack down on the proceeds of environmental crimes.
Chairing the G7 Finance Ministers’ Meeting in London, Rishi Sunak rallied his counterparts to work together to tackle the fiscal challenges arising from the global digital economy.
After years of discussions, finance ministers have agreed to reforms that will see multinationals paying their fair share of taxes in the countries where they do business.
They also accepted the principle of a global minimum rate ensuring that multinationals pay a tax of at least 15% in each country where they operate.
By ensuring that markets play their part in the transition to net zero, the group has also followed the UK’s lead by committing to require companies to report the climate impact of their investment decisions. – and concrete measures to crack down on environmental criminals.
Chancellor Rishi Sunak said:
These seismic tax reforms are something the UK has demanded and a huge price for the UK taxpayer – creating a fairer and 21st century tax system.
This is a truly historic agreement and I am proud that the G7 has shown collective leadership at this crucial time in our global economic recovery.
Global tax reform:
During the meeting, finance ministers agreed on the principles of an ambitious two-pillar global solution to address fiscal challenges arising from an increasingly globalized and digital global economy.
Under the first pillar of this landmark deal, the largest and most profitable multinationals will be required to pay taxes in the countries where they operate – and not just where they are headquartered.
The rules would apply to global companies with a profit margin of at least 10% – and would see 20% of any profit above the 10% margin reallocated and then subject to tax in the countries where they operate.
The fairer system will mean the UK will increase tax revenues for large multinationals and help pay for utilities here in the UK.
As part of the second pillar, the G7 also accepted the principle of at least 15% corporate tax globally, applied country by country, creating a more level playing field for UK businesses and fighting against the ‘tax evasion.
Discussions on the two pillars have been ongoing for many years – with the Chancellor making reaching a global deal a key priority for Britain’s G7 presidency. The deal will now be discussed in more detail at the meeting of G20 finance ministers and central bank governors in July.
Improve climate disclosures:
Finance ministers also stepped up action on environmental issues, following in the UK’s footsteps by committing for the first time to properly integrate climate change and biodiversity loss considerations into decision-making economic and financial.
Six years after the establishment of the Climate-Related Financial Disclosures (TCFD) Working Group, the UK has been instrumental in leading G7 countries to move towards mandatory climate disclosure in their respective economies. . It comes just over six months after the UK led the way in being the first country in the world to commit to doing so in November 2020.
This is a major step in ensuring that the global financial system plays its role in the transition to net zero, as investors better understand how companies manage climate risks and can allocate finance accordingly.
A coordinated G7 approach is crucial to avoid inconsistent market reporting and additional red tape, so finance ministers have also supported the work of the International Financial Reporting Standards Foundation to develop a basic global standard for financial reporting. High quality granular durability reports, built from TCFD. framework and work of sustainability standard setters.
Support nature and fight against environmental crime:
In support of the UK’s work to foster a nature-friendly economy, finance ministers welcomed the imminent launch of a nature-related financial disclosures task force – to reflect TCFD – and agreed to crack down on the proceeds of environmental crimes by introducing and strengthening central registers of corporate beneficial owners. The UK was one of the first countries in the world to introduce a public register of beneficial owners in 2016.
Disclosure of beneficial ownership through these records helps law enforcement to trace ill-gotten gains that are laundered by complex corporate structures, identify who ultimately owns or controls the business, and translates the findings. 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.
Support for vulnerable countries:
The G7 is also committed to continuing to support the poorest and most vulnerable countries as they address the health and economic challenges associated with COVID. Building on their milestone support of the $ 650 billion General Allocation of Special Drawing Rights (SDRs) earlier this year, finance ministers and central bank governors called for swift implementation of ‘by the end of August.
G7 countries also agreed to actively consider voluntarily channeling part of their allocated SDRs to meet other health needs, including vaccinations, and help enable a greener and more robust economic recovery in countries. most affected.
Addressing debt vulnerabilities and promoting debt transparency is essential to unlock sustainable and inclusive growth in developing countries. The G7 has also pledged to release details of new loans on a loan-to-loan basis and hopes that the G7, at the forefront of debt transparency, will pave the way for G20 countries and private sector creditors to do the same.
The G7 also praised the World Bank’s efforts on global health and vaccines, and urged them to use their financial firepower to help poor countries obtain vaccines, including through COVAX. The G7 also called on the IMF to step up efforts to finance vaccines and agreed that the private sector, including the pharmaceutical industry, should also play a bigger role.
Recognizing the need to continue to learn lessons from Covid-19 and prepare for future pandemics, finance ministers also agreed to develop new proposals to unlock market incentives to produce antibiotics to prevent antimicrobial resistance . Finance ministers agreed that they must act now to ensure the health and economic prosperity of G7 citizens and that of future generations.
More information :
- You can read the press release online.
- The G7 group agreed on the need for proper coordination between taxes on digital services and the new first pillar rules. The Chancellor reaffirmed his commitment to abolish British Summer Time once a first pillar solution is in place. It is intended to serve as a temporary fix and is a fair, proportionate and non-discriminatory tax that ensures digital businesses pay a UK tax that reflects the value they derive from UK users.
- An SDR is an asset issued by the IMF to increase members’ reserves and provide liquidity to vulnerable countries.
- Photos of the meeting are available on HM Treasury Flickr page.
- To mark the commitment on TCFD, trees will be planted in the National Forest, with eight tree species representing each of the G7 countries plus the EU delegation and include a Japanese red cedar and a Wellingtonia, among others. .
- The G7 includes the United Kingdom, Canada, France, Germany, Italy, Japan, the United States and the EU. The leaders of the IMF, the World Bank Group, the OECD and the FSB.