On Saturday, G7 countries secured a historic agreement to remove cross-border tax loopholes exploited by some of the world’s largest companies.
The Finance Ministers of G7, which comprise of US, UK, Germany, Canada, France, Italy, and Japan, said that it would support a worldwide corporate tax rate of at least 15%, as well as steps to guarantee that taxes are paid in the countries where businesses operate. The decision taken by the G7 countries will be placed before G20 countries, a group of developing and developed nations, in a meeting scheduled for July in Venice.
British finance minister Rishi Sunak told reporters,” 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.”
Facebook welcomed the G7 pledge on Saturday, despite the social media giant risking paying more.
Facebook has long called for reform of the global tax rules and we welcome the important progress made at the G7. Today’s agreement is a significant first step towards certainty for businesses and strengthening public confidence in the global tax system.
— Nick Clegg (@nickclegg) June 5, 2021
According to Amit Maheshwari of AKM Global Tax consulting firm, the accord is likely to help India because it is a significant market for a large number of tech businesses.
Sudhir Kapadia, Managing Director of EY India’s National Tax Leader, said the global corporate tax deal is a game-changer, particularly for large and emerging nations like India, which have long struggled to artificially lower corporate tax rates in order to attract much-needed foreign direct investment.
India’s Finance Minister Nirmala Sitharaman reduced corporate tax to 22% for domestic companies and 15% for new industrial units in September 2019. Existing domestic enterprises were also eligible for the reduced tax rate, but only under specified conditions.
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