Rishi Sunak has announced an “historic agreement” has been reached to reform the global tax system.
Speaking after a meeting of G7 finance ministers in London, the Chancellor said: “I am delighted to announce that today after years of discussion G7 finance ministers have reached a historic agreement to reform the global tax system.
“To make it fit for the global digital age, but crucially to make sure that it is fair so that the right companies pay the right tax in the right places and that’s a huge prize for British taxpayers.”
Treasury officials are “cautiously optimistic” that G7 finance ministers will agree moves to jointly tax online tech giants such as Amazon, Apple and Microsoft following talks in London.
Mr Sunak will chair a second day of talks at Lancaster House with his counterparts, including those from the US and Germany, as he looks to reach consensus on efforts to “appropriately” tax multinational digital businesses.
Efforts are also understood to be progressing on agreeing a minimum global corporation tax among G7 members but Treasury sources said that, while no agreement had been reached as yet, they were “cautiously optimistic” about the prospect of a deal.
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US president Joe Biden had initially proposed a minimum global rate for corporation tax, the tax businesses pay on their profits, of 21%.
However, last month the US treasury department put forward a plan for a “floor” of 15%, while calling for discussions to continue to “push that rate higher” at G7 meetings this month.
Agreement on a 15% baseline is likely to cause tensions with Dublin, with Ireland so far resistant to raising its corporation tax rate above 12.5%.
G20 countries, which includes emerging economies such as China and India, are also likely to be lobbied to sign up to the rate floor.
When opening the G7 finance ministers meeting on Friday, Mr Sunak said that securing a global agreement on digital taxation was a “key priority this year”.
The Chancellor said the group, which also consists of members from Japan, Canada, Italy and France, wanted “companies to pay the right amount of tax in the right place” and that he hoped an agreement could be reached at the first face-to-face meeting since 2019 due to coronavirus restrictions.
It has been suggested that the band of ministers want companies to pay taxes based on where their sales are, and not mainly where they have their operation, such as factories.
Mr Sunak is due to speak to the media on Saturday afternoon, by which point it is likely to be known whether a deal has been struck.
Officials said the Cabinet minister had used the gathering to “highlight the importance of reaching an agreement that ensures large companies pay an appropriate level of tax that reflects their economic activities in the UK”.
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In a briefing after Friday’s meeting, a Treasury spokesman said: “(Rishi) Sunak was clear that large digital firms should pay an appropriate level of tax where they operate so countries can raise revenue and invest in their public services – a priority for the Government – and highlighted that ‘opportunities to make truly lasting reforms like this do not come along very often’.”
According to the BBC, German finance minister Olaf Scholz said a 15% base corporation tax deal would “change the world” by helping countries pay back debts that have built up during the pandemic.
French finance minister Bruno le Maire meanwhile urged Ireland, which has one of the lowest corporate tax rates in the European Union, to get “on board”.
The finance ministers meeting is a precursor to the gathering of G7 leaders, which is due to be held in Carbis Bay in Cornwall from June 11-13.
