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The world can’t rely on a 1920s tax system, Rishi Sunak tells G7

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The world cannot rely upon a tax system largely originating from the 1920s, particularly in a “complex global digital economy”, Rishi Sunak has told ministers during a finance meeting of the G7 nations.

The Chancellor’s discussions with finance ministers from the US, Japan, France, Canada, Germany and Italy at Lancaster House in central London are set to continue on Saturday, when the countries are expected to come to a global agreement on how digital companies are taxed.

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Mr Sunak said that securing a fair cross-country consensus on how tech firms including Google, Facebook, Apple and Microsoft were taxed was a key priority, adding that the UK wanted companies to “pay the right amount of tax in the right place, and I hope we can reach a fair deal with our partners”.

US tech firms have long been criticised over the low rates of tax they pay globally in the face of unprecedented growth, significant valuations and headline-making profits.

While the companies maintain they pay all required taxes, governments and campaigners have lobbied for significant overhauls to the ways in which the companies are allowed to engineer paying minimal corporation tax.

Britain's Chancellor of the Exchequer Rishi Sunak, right, welcomes Kristalina Georgieva from the IMF, ahead of the G7 finance ministers meeting at Lancaster House in London, Friday June 4, 2021. (Steve Reigate/Pool via AP)
Mr Sunak, right, welcomes Kristalina Georgieva from the IMF, ahead of the G7 finance ministers meeting (Photo: AP/PA)

Earlier this week it was revealed that a subsidiary of Microsoft in Ireland paid no corporation tax last year, despite making profits of $315bn (£222bn) – close to three-quarters of the country’s gross domestic product (GDP).

Microsoft Round Island One, which collects licence fees from Microsoft’s copyrighted software, declared it has no employees other than its directors and that it was tax resident in Bermuda, where companies are not charged corporate income tax.

Facebook paid £28.5m in UK corporation tax in 2019 after its revenues crossed £1bn, while Google paid £50m against revenues of £1.8bn. In comparison, Amazon paid £293m on the £13.73bn it made in the UK during the same year.

US President Joe Biden, who is due to attend the leaders’ summit in Cornwall next week, has backed a minimum global corporation tax level with a proposed 15 per cent base rate in a bid to stop tech multinationals from avoiding paying tax offshore.

The new rules could see the US tech firms reporting profits into their home country rather than paying the country in which they operate – something Mr Sunak is keen to avoid.

The Chancellor urged the President to agree to tougher “tech tax” rules last week because the global tax system “isn’t working”, telling the Mail on Sunday that “our American friends… need to understand why air taxation of tech companies is important to us”.

“The right companies aren’t paying the right tax in the right places,” he said. “That’s not fair and that’s something that I want to fix.”

Mr Sunak and the G7 finance ministers are expected to make an announcement on Saturday outlining any agreements reached.


All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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