G7 finance ministers have reached agreement on the two-pillar approach to taxation of the digital economy, with the ‘largest and most profitable’ MNCs required to pay tax in the countries where they operate rather than where they have their headquarters. Under pillar one, MNCs with at least a 10% profit margin would see 20% of profits above the 10% margin reallocated and taxed in the relevant market country.
Under pillar two, the G7 have agreed in principle on a 15% global minimum rate of corporate tax (on a country-by-country basis). The group has also made a commitment to mandate company reporting on the climate impact of companies’ investment decisions.
The official communiqué outlines agreement on ‘the removal of all digital services taxes, and other relevant similar measures, on all companies’. Chancellor Sunak has confirmed that the UK will remove its unilateral digital services tax ‘once a pillar one solution is in place’.
The G7 members will next aim to reach international consensus at the G20 finance meeting in July 2021.
G7 finance ministers have reached agreement on the two-pillar approach to taxation of the digital economy, with the ‘largest and most profitable’ MNCs required to pay tax in the countries where they operate rather than where they have their headquarters. Under pillar one, MNCs with at least a 10% profit margin would see 20% of profits above the 10% margin reallocated and taxed in the relevant market country.
Under pillar two, the G7 have agreed in principle on a 15% global minimum rate of corporate tax (on a country-by-country basis). The group has also made a commitment to mandate company reporting on the climate impact of companies’ investment decisions.
The official communiqué outlines agreement on ‘the removal of all digital services taxes, and other relevant similar measures, on all companies’. Chancellor Sunak has confirmed that the UK will remove its unilateral digital services tax ‘once a pillar one solution is in place’.
The G7 members will next aim to reach international consensus at the G20 finance meeting in July 2021.
