Chancellor announces ‘historic’ tax deal at G7 finance meeting

Changes will also be made to ensure that large companies, especially those with a strong online presence, will pay taxes in the countries where they operate and not just where they are headquartered.

The new policy is believed to target tech giants Amazon and Microsoft.

Speaking after a meeting at Lancaster House, the Chancellor said: ‘I am delighted to report that today, after years of discussions, the G7 finance ministers have reached a historic agreement to reform the system. global tax.

“To adapt it to the global digital age, but more importantly to make sure it’s right so that the right businesses pay the right tax in the right places and that’s a huge price for UK taxpayers.”

Mr Sunak said he was “proud” of his colleagues, with Japan, Canada, France and Italy also being part of the group, for working together to produce an agreement that “finally brings our system in. global tax in the 21st century “.

Explaining the agreed tax reforms, a spokeswoman for the Treasury said: “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 based.

“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.”

Officials said the decision to agree to a 15% minimum corporate tax would create “a level playing field for UK businesses and crack down on tax evasion.”

The Chancellor said there had been “tremendous progress” on an issue that had been discussed for nearly a decade.

The deal is expected to be discussed in more detail at the meeting of G20 finance ministers and central bank governors in July, the Treasury confirmed.

A deal on a 15% benchmark is likely to cause tensions with Dublin, with Ireland so far reluctant to raise its corporate tax rate above 12.5%.

Labor lamented the G7 failed to push for a higher base rate after US President Joe Biden initially asked for a minimum of 21%, which the party said raised £ 131million additional for utilities.

UK corporate tax is set to rise well above 21%, however, after the Chancellor announced in the March budget that corporate income tax would drop from 19% to 25% by 2023 in part of efforts to rebuild public finances following record government borrowing during the pandemic.

Shadow Chancellor Rachel Reeves said: “This government must now show leadership, push for a 21% rate in the negotiations and use the money to fund our schools and our NHS.”

The Institute for Public Policy Research has called for the “ultimate goal of around 25%” to be pursued by G7 leaders.

But pro-free market think tank the Adam Smith Institute said Mr. Sunak had indeed tied his hands while ceding “power over our taxes to Washington’s demands.”

Deputy Director Matt Kilcoyne said: “These proposals are not in the UK’s best interest and Rishi has sold Britain short.

“Rishi Sunak’s flagship policies on super deductions and free ports are dead in the water. The chancellor’s own policies, undermined by his own pride.