London Daily

Focus on the big picture.
Sunday, Oct 05, 2025

G7: Rich nations back deal to tax multinationals

G7: Rich nations back deal to tax multinationals

The G7 group of advanced economies has reached a "historic" deal to make multinational companies pay more tax.

Finance ministers meeting in London agreed to battle tax avoidance by making companies pay more in the countries where they do business.

They also agreed in principle to a global minimum corporate tax rate of 15% to avoid countries undercutting each other.

Tech giants Amazon and Facebook are among those likely to be affected.

The deal announced on Saturday, between the US, the UK, France, Germany, Canada, Italy and Japan, plus the EU, could see billions of dollars flow to governments to pay off debts incurred during the Covid crisis.

Negotiated over many years, it will put pressure on other countries to follow suit, including at a meeting of the G20 next month, which includes China, Russia and Brazil.

The G7 attendees posed for photos at Lancaster House

US Treasury Secretary Janet Yellen told reporters that the "historic" agreement on a global minimum tax would "end the race to the bottom in corporate taxation and ensure fairness for the middle class and working people in the US around the world".

UK Chancellor of the Exchequer Rishi Sunak, who hosted the summit, said the agreement would make the global tax system "fit for the global digital age".

His German counterpart, Olaf Scholz, said it was "very good news for tax justice and solidarity and bad news for tax havens".

"Companies will no longer be in a position to dodge their tax obligations by booking their profits in lowest-tax countries," he said.

Why did they want to change the rules?


Governments have long grappled with the challenge of taxing global companies operating across many countries.

That challenge has grown with the boom in huge tech corporations like Amazon and Facebook.

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.

The deal aims to stop this from happening in two ways.

Firstly the G7 will aim to make companies pay more tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits.

Secondly, they want a global minimum tax rate so as to avoid countries undercutting each other with low tax rates.


The right to tax is the essence of sovereign power. That is why co-ordinated international action is so difficult.

It has been the dream of campaigners and mainly European finance ministers for years. They would scarcely have believed it was possible until the past few months. But the need to fill coffers emptied by the pandemic, and the arrival of the Biden administration in the US, created a moment of opportunity.

There was, however, a big compromise to get this across the line. A minimum corporation tax rate of 15% is rather low. Although European finance ministers succeeded in including the phrase "at least 15%", which offers a path to get that number higher.

How much bite this change actually has will depend on the fine print of ongoing negotiations. Tech firms say they welcomed the move. Facebook vice president Nick Clegg said they recognised it could mean the company "paying more tax, and in different places".

And then there is the question of the rest of the world. This now goes from the G7 to the wider G20 group, including China, Russia and Brazil, and then beyond.

The German finance minister told me that the likes of Ireland, with its low corporation tax rate, now needed to "get on the train".

The Irish finance minister told me he accepted that change was coming, but he would continue to argue for legitimate tax competition.

A process has begun, a precedent has been set. It may or may not end up being transformative, but this moment is historic.

How would the agreement work?


The rules on making multinationals pay taxes where they operate - known as "pillar one" of the agreement - would apply to global companies with at least a 10% profit margin.

Twenty percent of any profit above that would be reallocated and taxed in the countries where they operate, according to the G7 communiqué.

In the case of the UK, for example, more tax revenue would be raised from large multinationals and would help pay for public services.

The second "pillar" of the agreement commits states to a global minimum corporate tax rate of 15% to avoid countries undercutting each other.

In the UK, corporation tax is already 19% and is set to rise to 25% by 2023 in response to spending during the pandemic.

Ms Yellen said there was an understanding that national digital services taxes such as those levied by the UK and EU countries would be scrapped and replaced by the new agreement. Such taxes are regarded by the US as unfairly targeting American technology giants.

"The timing remains to be worked out exactly but there is broad agreement that these two things go hand in hand," the treasury secretary said.

Asked whether Amazon and Facebook would fall under the new proposals for a global minimum corporation tax, she replied: "It will include large profitable firms and those firms, I believe, will qualify by almost any definition."

Separately, the G7 also agreed to give a commitment to make it mandatory for firms to report the climate impact of their investment decisions.

What happens next?


The agreement will be discussed in detail at a meeting of G20 finance ministers in July in Venice.

Paolo Gentiloni, the EU commissioner for the economy, described Saturday's agreement as a "big step... towards an unprecedented global agreement on tax reform" and promised the EU would "contribute actively to making that happen" in Venice.

Japan's Finance Minister Taro Aso (L) rubbed elbows with European Commissioner for Economy Paolo Gentiloni

But Irish Finance Minister Paschal Donohoe, whose country offers a low 12.5% corporate tax rate, tweeted any agreement would have to "meet the needs of small and large countries, developed and developing".

He referred to the Organisation for Economic Co-operation and Development (OECD), an intergovernmental economic organisation with 38 member countries, which promotes world trade and has been also working on updating global tax rules.

How have the corporations reacted?


A spokesperson for Amazon quoted by Reuters news agency said: "We believe an OECD-led process that creates a multilateral solution will help bring stability to the international tax system.

"The agreement by the G7 marks a welcome step forward in the effort to achieve this goal."

Facebook's Nick Clegg described the agreement as a "significant first step towards certainty for businesses and strengthening public confidence in the global tax system".

A spokesperson for Google said: "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 finalised soon."


G7 global tax 'levels the playing field'


Newsletter

Related Articles

0:00
0:00
Close
Trump Stands Firm in Shutdown Showdown and Declares War on Drug Cartels — Turning Crisis into Opportunity
Surge of U.S. Billionaires Transforms London’s Peninsula Apartments into Ultra-Luxury Stronghold
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Jeff Bezos Calls AI Surge a ‘Good’ Bubble, Urges Focus on Lasting Innovation
Japan’s Ruling Party Chooses Sanae Takaichi, Clearing Path to First Female Prime Minister
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Taylor Swift’s ‘Showgirl’ Launch Extends Billion-Dollar Empire
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
Disney Reinstates ‘Jimmy Kimmel Live!’ after Six-Day Suspension over Charlie Kirk Comments
U.S. Prosecutors Move to Break Up Google’s Advertising Monopoly
Nvidia Pledges Up to $100 Billion Investment in OpenAI to Power Massive AI Data Center Build-Out
U.S. Signals ‘Large and Forceful’ Support for Argentina Amid Market Turmoil
×