London, 5 June 2021: Tech giants Facebook, Google and Amazon have welcomed a global tax deal agreed to by the Group of Seven (G7) countries. The proposal aims to prevent multinational businesses from evading taxes and has been set at 15%.

Consensus on the proposal was
reached at the G7 finance ministers' meeting held in England yesterday, under the convenorship of Britain's Chancellor of the Exchequer Rishi Sunak.

Sunak said the seven advanced economies had agreed to "reform the global tax system to make it fit for the global digital age and crucially to make sure that it’s fair, so that the right companies pay the right tax in the right places".

The main part of the proposal states that countries around the world should tax their home companies' overseas profits at a rate of at least 15%.

This global minimum corporate tax would deter the practice of using accounting schemes to shift profits to a few very low-tax countries, known as “tax havens”, such as The Bahamas or British Virgin Islands.

The second part of the proposal which the G7 countries have adopted allows countries to tax a share of the profits earned by companies "that have no physical presence but have substantial sales", for instance through selling digital advertising.

Reaction from the world’s biggest companies has been favourable. Google released a statement following the G7 announcement. Spokesperson José Castañeda says “We strongly support the work being done to update international tax rules. We hope countries continue to work together to ensure a balanced and durable agreement will be finalised soon.” Facebook also welcomed the G7 agreement, asking the international community to take cognisance of the fact that it is supporting the proposal even though it would have to pay more taxes. Its Vice President of global affairs, Nick Clegg, says “We want the international tax reform process to succeed and recognise this could mean Facebook paying more tax, and in different places.” In turn, Amazon believes “an OECD-led process that creates a multilateral solution will help bring stability to the international tax system. The agreement by the G7 marks a welcome step forward in the effort to achieve this goal.”

The proposal will now be tabled before the Group of 20 (G20) states that are expected to convene in July. Further discussion is expected on the tax proposal before it becomes international law.