For many years people have talked to me about how tech companies get away with not paying enough tax and the global tax system needs to be fit for the digital age.
As hosts of the G7, the Government have been pushing for a new system that means that the right companies pay the right tax in the right places.
This weekend the Chancellor Rishi Sunak led an agreement for changes to create a new, fairer tax system.
They agreed to create a minimum global corporation tax and new rules to ensure that large global firms and tech giants pay a fair share of profits in the countries where they do business.
The majority of people will see that it makes it fairer for tech companies to pay a levy on sales in the country where they are earned rather than where they have headquarters. This will benefit the UK.
The rules would apply to the largest and most profitable multinationals with at least a 10 per cent profit margin – and would see 20 per cent of any profit above the 10 per cent 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.
The proposed 15% minimum corporation tax is designed to prevent countries flooring their corporation tax and companies moving business there. This would affect places like Ireland who have a very low corporation tax (and many tech companies are therefore based there) but we have recently increased corporation tax from 19% to 25% so there should be no immediate impact.
Climate change will be embedded into global financial decisions as we transition towards net zero. G7 Partners have followed the UK’s lead by committing to embed climate change and biodiversity loss considerations into economic and financial decision-making, ensuring the global financial system plays its part transition to net zero. The UK was the first country in the world to commit to making climate disclosures mandatory in November 2020.
The agreement will be put to the G20 countries now. There is a long way to go but this is certainly something that we can be proud of leading as many before have tried to achieve change and failed.
As I am on Facebook - worth a note that I understand Facebook has welcomed the agreement and understands it may mean them paying more tax in different places.