The rich G7 countries have agreed on imposing a global corporate tax. With it, multinational companies will face 15% taxation. The G7 group has termed it a “historic agreement”. Interestingly, UK has welcomed the deal despite many British Overseas Territories being tax havens. The UK said it is happy with the global tax reform that requires large multinational technology giants to pay their fair share of tax.
Among other G7 nations, Germany has appreciated the deal calling it a very good news for tax justice and bad news for tax havens.
If implemented, it would change the international corporate taxation, where profits are taxed only where companies originate. The detail of the first part of the agreement clarifies that the large global companies with profit margins of at least 10% may have to pay taxes on international profits to countries where their sales take place.
The next step by G7 will be to have the deal ratified at the G20 meeting in July to help it make a global accord.
The deal benefits the US the most as it loses corporate tax in billions annually. Tax haven nations and MNCs, especially from the IT sector, which benefits from forming subsidiaries in these nations, may create challenges in implementation. Addressing them will be critical.