G7 leaders reach 'historic' agreement to crack down on tech giants by forcing Amazon, Facebook, and others to pay more tax

• The G7 group of wealthy nations has reached a "historic agreement" on taxing multinational companies.
• The agreement will ensure that tech giants pay more tax where they operate.
• It also pledges to introduce a global minimum corporate tax rate of 15 percent.

Finance ministers for some of the world's wealthiest nations have reached a "historic agreement" to tackle tax abuses by internet giants and to introduce a global minimum corporate tax rate of 15 percent.

"I am delighted to announce that today after years of discussion G7 finance ministers have reached a historic agreement to reform the global tax system," Rishi Sunak, the UK's Chancellor of the Exchequer, said after a Group of Seven (G7) meeting in London.

"To make it fit for the global digital age, but crucially to make sure that it is fair so that the right companies pay the right tax in the right places and that's a huge prize for British taxpayers," Sunak added.

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The deal - agreed on by Canada, France, Germany, Italy, Japan, the UK, and the US - will ensure that multinationals pay more tax where they operate, the Financial Times said. This is to avoid companies setting up local branches in countries with low corporate tax rates and then declaring their profits there, the BBC reported.

The "first pillar" of the agreement would apply to global companies with at least a 10 percent profit margin, the BBC said. A 20 percent tax on any profit above that margin would be reallocated and taxed in the countries where they make sales, Sunak said on Twitter.

It is likely to affect tech giants, including Amazon, Facebook, and Google, Metro reported.

The "second pillar" is a commitment to introducing a global minimum corporate tax rate of 15 percent. This will disincentivize major companies from declaring profits in tax havens, the Financial Times said. It will also stop countries from trying to undercut each other.

The latter is seen as a big win for the Biden administration. President Joe Biden's infrastructure plans include a hike in the country's corporate tax rate, Insider's Juliana Kaplan reported. If rates are more uniform around the world, as this commitment pledges, it could encourage multinational companies to remain in the US, even with higher taxes, Kaplan said.

Secretary of the Treasury Janey Yellen said on Twitter that the global minimum tax will "end the race-to-the-bottom in corporate taxation" and would "level the playing field" for business.

The "Silicon Six"- Microsoft, Amazon, Facebook, the Google owner Alphabet, Netflix, and Apple - have long been accused of avoiding paying tens of billions less tax over the past decade on trillions of dollars of revenue than the figures cited in annual financial reports would seem to entail, according to the Guardian.

Nick Clegg, Facebook Vice President for Global Affairs, told Insider via email: "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. We want the international tax reform process to succeed and recognize this could mean Facebook paying more tax, and in different places."