On June 5, 2021, the Group of Seven (G7) Finance Ministers agreed to back an historic international agreement on global tax reform, which would ensure that large multinational enterprises (MNEs) pay their fair share of tax.
The G7 agreed the principles of an ambitious two Pillar global solution to tackle the tax challenges arising from an increasingly globalized and digital global economy.
Under Pillar One, the largest and most profitable multinationals will be required to pay tax in the countries where they operate – and not just where they have their headquarters. The rules would apply to global firms with at least a 10 percent profit margin – and would see 20 percent of any profit above the 10 percent margin reallocated and then subjected to tax in the countries they operate.
Under Pillar Two, the G7 also agreed to the principle of at least 15 percent global minimum corporation tax operated on a country-by-country basis, creating a more level playing field for UK firms and cracking down on tax avoidance.
Chancellor Rishi Sunak said: “These seismic tax reforms are something the UK has been pushing for and a huge prize for the British taxpayer – creating a fairer tax system fit for the 21st century. This is a truly historic agreement and I’m proud the G7 has shown collective leadership at this crucial time in our global economic recovery.”