The value of Big Tech shares fell in pre-hour trading after the G7 inked a deal to establish a minimum global corporate tax rate of at least 15%, designed to stop the tax dodging antics of massive multinationals.
The idea, essentially, is aimed at ensuring that Big Tech don’t skirt their tax obligations in the countries where they earn their money.
Massive multinationals in both the technology industry and outside of it have over the years used a plethora of tax dodging schemes, including resorting to so-called “profit shifting.”
That is when they declare their earnings in tax havens or in low tax jurisdictions – such as the Republic of Ireland, Bermuda, the Caymans, Luxembourg, the Netherlands, Singapore and Switzerland – rather than in the nations where they actually make their money.
The G7 tax deal aims to put a stop to the practice and change the flow of hundreds of billions of dollars around the world.
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The rules would apply to global firms with at least a 10% profit margin – and would see 20% of any profit above the 10% margin reallocated and then subjected to tax in the countries they operate.
“These seismic tax reforms are something the UK has been pushing for and a huge prize for the British taxpayer – creating a fairer tax system fit for the 21st century,” said Rishi Sunak, UK chancellor of the Exchequer, following the signing of the deal on Saturday.
“This is a truly historic agreement and I’m proud the G7 has shown collective leadership at this crucial time in our global economic recovery.”
Despite this, several of the big tech firms have seemingly welcomed the deal
Nick Clegg, the former leader of the UK Liberal Democrats and vice-president of global affairs at Facebook, tweeted: “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 step towards certainty for businesses and strengthening public confidence in the global tax system.”
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
Google spokesman José Castañeda told Reuters: “We strongly support the work being done to update international tax rules. We hope countries continue to work together to ensure a balanced and durable agreement will be finalized soon.”