Finance ministers of the G7 countries have signed a deal to make tech giants and multinationals pay a minimum global corporation tax for the first time.
Chancellor Rishi Sunak hailed the “historic” agreement – which forces the world’s biggest companies to pay at least 15% tax – as a “huge prize for British taxpayers, creating a fairer tax system for the 21st century.
“This is a truly historic agreement and I’m proud the G7 has shown collective leadership at this crucial time in our global economic recovery,” said Sunak who has been hosting a preliminary session of the G7 summit at London’s Lancaster House, ahead of the leaders’ meeting in Cornwall next weekend.
Fit for the global digital age
Years of negotiations – driven by Germany, France, Italy and Spain.- culminated in today’s breakthrough which followed two days of talks between the G7 finance ministers. The Guardian said the agreement “would be key to paving for a wider deal between nations including China, India and Brazil” at next month’s G20 meetings in Italy.
Under today’s (June 5) deal companies will be subject “to tax in the countries where they make sales” and Sunak said that this will create “a more level playing field for UK firms” while also “cracking down on tax avoidance.”
He added: “I’ve made securing an agreement on digital tax a key priority of mine for the G7 Presidency with the fairer system raising more tax to pay for public services.”
Sunak said the deal is “fit for the global digital age” and “crucially” ensures “it is fair so that the right companies pay the right tax in the right places.”
Sunak’s ‘global tax cartel’
While the chancellor exults the “seismic tax reforms”, critics are claiming multinational companies will continue to exploit opportunities provided by tax havens.
Others are accusing the chancellor of creating a “global tax cartel”.
Adam Smith Institute deputy director, Matt Kilkoyne said: “Rishi has rushed out an announcement that the G7 has created a global tax cartel. The world’s most powerful governments have clubbed together to shirk the responsibility of going for growth and chosen instead to maximise the taxman’s take.”
Kilcoyne said the “proposals are not in the UK’s interest and Rishi has sold Britain short. Sunak’s flagship policies of Super Deductions and Free Ports are dead in the water. The Chancellor’s own policies, scuppered by his own hubris.”
Meanwhile, Amazon, Google and Facebook all welcomed the G7’s tax crackdown. Nick Clegg – the former deputy prime minister and current vice president of global affairs at Facebook- said “we want the international tax reform process to succeed and recognise this could mean Facebook paying more tax, and in different places”.
The chancellor said the G7 countries have also agreed a UK initiative to make climate reporting mandatory as well as “measures to crack down on the proceeds of environmental crimes”.
6,500 police officers to secure G7 summit
The cost of policing the G7 summit – to be held at Carbis Bay near St Ives from June 11-13 – is estimated to be around £70 million with more than 6,500 officers drafted in from around the country to assist. Devon and Cornwall police have called the event the “largest security operation in its history”.
Joe Biden – who reportedly wanted a minimum 21% global corporate tax rate before being persuaded on 15% by other countries – will make his first overseas trip as US president to attend the meeting in Cornwall.
The resort at Carbis Bay is protected by ten foot high steel fences and police will be closing roads and manning security checkpoints around the county, beginning on Wednesday at Newquay airport.
Truro and Falmouth have been designated official protest sites which Resist G7 and other campaign groups have already said they will boycott because they have “no relevance to the G7”.
‘In St Ives more than one in three children live in poverty’
A spokesperson for Resist G7 said the millions spent hosting and policing the event “would be better spent on alleviating poverty nearby, in one of the least well-off parts of the UK.
“In St Ives – next to the lavish Carbis Bay Hotel – more than one in three children live in poverty. Quite rightly, local residents are asking why some of the estimated £70m won’t be used to address child poverty, homelessness or the spiralling use of foodbanks here.”
Green and Black Cross – “an independent grassroots project set up in the spirit of mutual aid to support social and environmental struggles within the UK – has launched a legal support fund to “support protestors who are resisting the G7 next week in Cornwall.”
The leaders of the G7 countries – Canada, Italy, Japan, France, Germany, UK and the US will be joined by the heads of the invited countries – Australia, India, South Africa and South Korea – at the summit.