Last weekend, finance ministers from the G7 reached a historic deal on global tax policy.
At a summit in Cornwall, they agreed to close loopholes that allow multinational corporations to massively reduce their tax bill. Historically, organisations have achieved this by headquartering corporations in a low-tax economy – but the new deal would require companies to pay taxes in the jurisdictions where they make their sales.
The G7 accord also pushed for a global minimum corporation tax rate of 15%, which aims to end the “race to the bottom” that has taken hold in recent years. With such a minimum in place, it would no longer make sense to headquarter operations in places like Bermuda or the Cayman Islands.
This news is a victory for global tax reform campaigners. They have long argued that we need international co-operation to ensure that companies pay their fair share and make proper contributions to post-pandemic rebuilding. But experts are questioning whether this truly marks the end of the “zero tax” era.
After all, this deal was only agreed upon by G7 member states. They still need to convince the G20, who are meeting in Venice next month, and after that, there remains a steep hill to climb before global consensus becomes a reality.
If the deal goes through, what will it mean for business? Well, for most, it won’t make a difference: ordinary SMEs and even larger corporations tend to pay the appropriate level of corporation tax already. The companies hit would be the likes of Amazon, Google and Apple: companies with a global presence that can shift their profits around the world. Whether they will pay more and whether the proposed changes negatively impact consumers through higher prices remains to be seen. Nevertheless, last week’s G7 accord is a major step forward.
One thing is certain: the business landscape is shifting, and it’s more important than ever to stay up to date on the latest developments. Book your place at the UK Business Awards to find out what the country’s top organisations are up to! And remember: there’s a discount if you book your place before June 21!