'Historic' deal: G-7 leaders make tech giants pay fair share in taxes

Rishi Sunak announces ‘historic’ deal to force tech giants to pay more tax (Photo Credit: Screenshot from The Independent)

On Saturday, the United States, the United Kingdom, and other rich countries secured a breakthrough agreement to extract extra money from multinational corporations like Amazon and Google and limit their incentive to shift earnings to low-tax offshore havens.

After the G7 advanced economies agreed to support a minimum global corporate tax rate of at least 15%, hundreds of billions of cash might pour into the wallets of governments left cash-strapped by the coronavirus disease (Covid-19) epidemic.

The decision was made during the G7 finance ministers' meeting in London.

notably, 20% of the revenues of approx 100 of the world's largest corporations - including Google, Facebook, Amazon, and Microsoft - will be redistributed to the nations where sales have been made.

Rishi Sunak, the British Treasury's head, wrote a Twitter thread explaining the deal's implications.

In one of the tweets, he wrote: "Under the principles of the groundbreaking changes, the greatest global corporations with profit margins of at least 10% will be in scope - with 20% of any earnings exceeding the 10% margin reallocated and then subjected to tax in the countries where they make sales."

Further, he stated that the action will even the playing field for UK businesses while also clamping down on tax evasion.

The agreement, according to US Treasury Secretary Janet Yellen, “provides enormous momentum” toward a worldwide agreement that “would halt the race to the bottom in corporate taxes and assure justice for the middle class and working people in the United States and throughout the world.”

The finance ministers' discussion arrives ahead of the G7 leaders' annual summit, which will take place in Cornwall, England, from 11th to 13th June.

"Signaling that there is unanimity on some of the major characteristics of what's being debated worldwide was really, really significant," said Manal Corwin, a tax principal at professional services company KPMG and a former Treasury Department official.

Other nations would abolish their unilateral digital tariffs in favour of a global agreement, according to the pact reached on Saturday.

Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States comprise the Group of 7. Representatives from the European Union also attend. Although the forum's judgments aren't legally enforceable, leaders can utilise them to exercise political influence.