What tax reforms have the G7 ministers agreed upon, and what does this mean for the United Kingdom?
G7 finance ministers have announced a “historic” agreement to agree on a worldwide corporate tax base rate and changes aimed at multinational corporations.
Here’s a breakdown of what the changes mean and how they might affect the United Kingdom.
– First and foremost, what did Rishi Sunak and his colleagues agree on?
All seven finance ministers agreed to a global corporation tax rate of “at least” 15%.
Major firms, particularly those with a large internet presence, would pay taxes in the nations where they operate, not just where they have headquarters, according to a shake-up of the tax system.
– Does this imply that the NHS will receive a significant increase in tax revenue?
Both yes and no. The UK’s corporation tax rate is already at 19 percent, significantly over the agreed-upon minimum threshold. And it’s only going to get worse.
As part of measures to repair the public finances following unprecedented Government borrowing during the pandemic, Chancellor Rishi Sunak indicated in the March Budget that the tax on corporate earnings will rise to 25% by 2023.
For this reason, the Treasury appears to be placing a stronger focus on big company tax reforms, describing them as a “fairer system” that will allow the UK to gather “more tax revenue from huge multinationals and help pay for public services.”
– Why was the suggested tax reform necessary?
There have long been calls for companies like Amazon, the world’s largest online retailer, and Google, the world’s most powerful technological company, to pay a larger share of taxes based on their UK sales.
Last year, Amazon’s UK sales increased by 51% to around £20 billion, boosted by lockdown restrictions that compelled customers to shop online owing to Covid-19 limits.
Despite the rise, Altus Group, a real estate advisory firm, stated the retail behemoth had a tax-to-turnover ratio of only 0.37 percent.
– So, how are the huge corporations going to be targeted?
The G7 is a group of seven countries. (This is a brief piece.)