A few days ago, we had informed you that Silicon Six, some of the biggest tech companies in the world, had been accused of inflating reported taxes for over a decade. Now, news holds that the G7 Summit has reached a “historic deal”, which will reportedly help avoid tax evasion by big companies.
Now, a Global Minimum Corporate Tax of 15%
The move, which has been hailed by tech giants Twitter and Facebook, calls for setting up a global minimum corporate tax of 15% in the least, and changes in the country’s that will benefit from the same. It might be noted that the lower tax limit is significantly less than the 21% that was demanded by POTUS Joe Biden.
The deal was arrived at by the financial ministers of the member countries of G7, and has been supported by Rishi Sunak, Chancellor at Exchequer, who called it a “proud moment”. He further added that this would ensure that the “right companies pay the right tax in the right place”.
What Sunak’s second statement means is that now, companies, and especially, the bigger and more powerful ones, who have a strong online foothold, will have to pay taxes in the country that they operate in, and not in the country that they are headquartered at.
This implies that a US-based company functioning in say, China, take Twitter China for example, will have to pay taxes to the Chinese government instead of the States. (Please not that this is just an example).
Easier Tracking of Companies Operating in Multiple Countries
These guidelines will now help countries pull the reins tighter on industry biggies like Facebook, Amazon and Google. Such companies have for years been raking in huge profits in areas where they don’t have to pay high taxes.
What was surprising is that the G7 deal announcement was welcomed by Facebook’s VP Nick Clegg, who said that the company wants the “international tax reform process to succeed” even if it means that FB will “have to pay more tax and in different places.”
The social media platform wasn’t the only one to show support however, as contemporaries like Google and Twitter have also expressed that they are looking forward to the new system.
Under the new terms, companies which have a profit margin greater than 10% will have a portion of tax that will be taken above that level, and then reallocated on the basis of sales, to different countries.