The G7 countries have come to an international agreement on a minimum corporate tax rate of 15% for digital giants such as Google, Amazon and Facebook, making it trickier for them to wheedle out of their tax obligations.
The Group of Seven countries — Canada, France, Germany, Italy, Japan, the UK and the US — came to a deal on Saturday that will likely see said big tech companies forking out more tax in total, globally.
The “historic agreement” is intended to bring the global tax system up to date “for the global digital age”, British finance minister Rishi Sunak reportedly said.
The deal is designed to stop big tech companies from taking advantage of complex tax arrangements to shy away from paying true corporate tax rates in the countries where they earn their money.
In Australia, for example, Facebook paid $21.1 million in tax in 2020, despite reportedly earning some $712 million from Australian advertisers.
Netflix reportedly paid just $550,000 in tax here, despite bringing in more than $1 billion from Aussie subscribers.
After the meeting, US Treasury Secretary Janet Yellen hailed the agreements as a “significant, unprecedented commitment” that will “end the race-to-the-bottom in corporate taxation”.
That 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 U.S. and around the world.
— Secretary Janet Yellen (@SecYellen) June 5, 2021
Nick Clegg, Facebook’s vice president for global affairs and former UK deputy prime minister, also seemingly welcomed the news, saying Facebook has “long called for reform on global tax rules”.
“Today’s agreement is a significant first step towards certainty for businesses and strengthening public confidence in the global tax system,” he said in a tweet.
We want the international tax reform process to succeed and recognize this could mean Facebook paying more tax, and in different places.
— Nick Clegg (@nickclegg) June 5, 2021
While Australia is not one of the seven, Treasurer Josh Frydenberg said he welcomed the commitment to a globally consistent approach, and that Australia “will remain an active and constructive participant in these OECD-led discussions”.
However, the 15% rate is considerably lower than the Australian company tax rate (and lower than that of the G7 countries, too).
In Australia, companies with an aggregated annual turnover of $50 million or more are subject to 30% tax on profit. Those with turnover of less than $50 million pay 26% — reducing to 25% in the 2021-22 income year.
Business Council of Australia chief executive Jennifer Westacott jumped on the global news to demand a lower tax rate for Aussie businesses, too.
“At double our 30% rate, a global minimum of 15% leaves Australia severely exposed in its ability to attract global capital,” she reportedly said.
Australia needs a “permanently competitive tax system” to prevent projects and investments going to other nations.
”If the Parliament still isn’t prepared to give Australia a globally competitive tax rate it can at least put in place the right tax incentives, a workplace relations system that creates jobs, a modern skills system that prepares workers for the future and it can act to axe the red tape that makes it harder to do business.”
What do you make of the G7 deal? Is it time to change Australia’s corporate tax rate? Let us know.