The G7 Finance Ministers, meeting in Cornwall in the UK under the UK’s Presidency, issued a media release dated 5 June 2021, announceing that they had agreed to principles of an ambitious two Pillar global solution to tackle the tax challenges arising from an increasingly globalised and digital global economy.
See below for further detail.
- Under Pillar One of this historic agreement, 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 & Central Bank Governors meeting in July.