The G7 group of leading economies has reached a "historic" deal on taxing multi-national companies, the UK's Chancellor of the Excheque

Rich nations back deal to tax multinationals

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2021-06-05 11:30:01

The G7 group of leading economies has reached a "historic" deal on taxing multi-national companies, the UK's Chancellor of the Exchequer, Rishi Sunak says.

At the moment companies can set up local branches in countries that have relatively low corporate tax rates and declare profits there.

That means they only pay the local rate of tax, even if the profits mainly come from sales made elsewhere. This is legal and commonly done.

Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates.

Secondly, the rules will aim to make companies pay tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits.

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