Historic G7 deal makes possible fair taxation of Big Tech multinationals

I am in favour of low taxes with as few exemptions as possible - it is fairer and less harmful that everyone pays some tax, and if you have too many loopholes and exemptions it is far often those who can least aford to pay who end up paying the most.

There has been an issue for a long time with "Big tech" online multinationals evading the taxes which SMEs (small and medium size businesses) have to pay by adjusting their internal accounting rates so as to declare profits not in the country where the relevant business was done but in whichever of the countries where they operate has the lowest tax rates.

Getting to the truth of where the work which generated revenue for a multi-national was done can be preposterously complicated, but the problem is real and leads to unfair competition.

The only way to deal with multinational tax avoidance is multinational tax competition, - and that makes today's announcement by UK chancellor Rishi Sunak of a deal at the G7 a really big deal.

Sunak has announced that G7 leaders have struck an “historic agreement” to force internet giants to pay a fairer share of tax, including in the UK.

The agreement will “make sure the right companies pay the right tax in the right places”, the Chancellor promised.

The breakthrough follows years of largely futile attempts to end massive tax avoidance by major tech firms.

Now they will have to pay corporation tax rate of at least 15 per cent. Further rises may be agreed in future: US president Joe Biden originally proposed 21 per cent.

Perhaps even more significantly, 20 per cent of the profits of around 100 of the biggest firms – likely to include Google, Facebook, Amazon and Microsoft – would be reallocated to the countries where sales have taken place, if this deal is ratified.

The move is designed to end “offshoring”, where companies set up legal entities in low-tax companies – regardless of where their revenues are actually earned.

Mr Sunak said the agreement would tackle tax havens and tax-dodging digital companies, vowing: “We are going to level the playing field.”

Speaking after a meeting of G7 finance ministers in London, he said it would make the tax system “fit for the global digital age”, adding: “That’s a huge prize for British taxpayers.”

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