Rishi Sunak greets G7 finance ministers at Lancaster House
At a meeting in London, the world’s seven most advance economics concluded the agreement that will help start the battle against major corporations avoiding paying tax in countries where they make huge sums. The finance ministers also made a pact in principle to a worldwide minimum corporate tax of 15 percent, which is aimed at ensuring nations don’t undercut one another. Among those most likely to be affected are giants in the tech world, including Amazon, Google, Facebook and Apple.
The tax proposal has been long in the making and comes just after reports showed that an Irish subsidiary of Microsoft paid zero corporation tax – despite securing $315bn (£222bn) profit last year.
The firm was able to do so as it was a resident of Bermuda for tax purposes.
The move has been heralded in many quarters, including by the UK’s Chancellor Rishi Sunak, who claimed the deal would make the global tax system “fit for the global digital age”.
But prior to the meeting, Ireland admitted it had “significant reservations” about the proposals, which were brought forward by US President Joe Biden.
Ireland on brink: G7 tax plan threatens major exodus of tech giants in Dublin
G7 summit: The finance ministers in London
Their main concern was over the minimum corporate tax rate, as Ireland – which has a tax rate of 12.5 percent – has one of the lowest in the world.
This has allowed firms such as Facebook and Google to make their European operations base in Ireland.
If these go ahead, it is feared in Ireland the likes of US tech firms Apple, Microsoft and Google-parent Alphabet, could ditch Dublin and head elsewhere.
One major concern for some is that these firms, the Telegraph reports, directly account for approximately one in eight jobs in the economy.
Paschal Donohoe at the G7 summit
And Irish finance minister Paschal Donohoe admitted Ireland would resist the changes, particularly if they have an impact on the nation’s ability to undercut its rivals.
Speaking in April, Mr Donohoe argued the proposals could see Ireland lose 20 percent of its tax revenues, and added that he would only support an agreement that allowed “appropriate and acceptable tax competition”.
He did admit to having reservations about their being a minimum rate.
Mr Donohoe said Ireland would aim to retain its 12.5 percent tax rate, as he argued that smaller nations must be allowed to use lesser rates to compensate for “advantages of scale”.
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Google’s European headquarters in Dublin, Ireland
He added: “I believe that small countries, and Ireland is one of them, need to be able to use tax policy as a legitimate lever to compensate for the real, material and persistent advantage enjoyed by larger countries.”
After the agreement was confirmed, the tech firms responded – including a spokesperson for Amazon, who said that an Organisation for Economic Co-operation and Development (OECD)-led process “that creates a multilateral solution will help bring stability to the international tax system”.
They added: “The agreement by the G7 marks a welcome step forward in the effort to achieve this goal.”
Ireland’s Paschal Donohoe with Rishi Sunak
The OECD is an “intergovernmental economic organisations” that has 38 member countries.
Its aim is to promote world trade, and more recently has been behind work on updating global tax rules.
Sir Nick Clegg, vice‑president for global affairs and communications at Facebook, described the pact as a “significant first step towards certainty for businesses and strengthening public confidence in the global tax system”.
A spokesperson for Google said: “We strongly support the work being done to update international tax rules. We hope countries continue to work together to ensure a balanced and durable agreement will be finalised soon.”