Will G7 agreement see US tech giants pay less tax in UK?

Posted on June 9, 2021 by Jonathan Symcox

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A think tank has claimed that US tech giants Google, Facebook, Amazon and eBay could pay less tax in the UK than at present under a new agreement signed by the G7. 

Finance ministers of the leading nations agreed the global minimum corporation tax at the weekend, which has a stated aim of preventing tech giants from avoiding tax. 

It will achieve this by cementing a 15 per cent global minimum corporate tax rate, which will prevent companies from taking advantage of tax havens. 

This will result in the collection of more tax from UK-headquartered corporations, but not affect US companies in any way.  

Another part of the G7 agreement – Pillar One – aims to make firms pay tax in the countries where they have users. Analysis from Tax Watch found that the new rules mean Amazon, Facebook, Google and eBay would pay equivalent or less tax than they do at present in the UK.  

However, the concurrent dropping of the UK’s own digital services tax, introduced last year, would result in “very substantial tax cuts” here for American tech companies, according to Tax Watch. 

The 2% levy on revenue generated from UK users was expected to raise £500m a year for the Treasury. 

It said based on the companies’ 2019 figures, Google would pay £158.7m less tax, while Facebook’s cut would be £22.2m and eBay would benefit to the tune of £11.9m. 

Amazon would not qualify for this area of the agreement as its profit margin is below the required 10%. There are reports that the G8 plans to change the rules to separate out business divisions, which would make Amazon Web Services eligible to pay tax as it has a margin of 25%.  

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“Our analysis shows that for every company that is subject to the DST, the Pillar One proposals would lead to substantially less money being raised in taxation in the UK,” Tax Watch said. 

“If the UK therefore goes forward with the removal of the DST, as the G7 communique strongly suggests it will, the package of reforms will lead to a net loss of tax in the UK from eBay, Amazon, Google and Facebook.  

“While not the only companies likely to see a UK tax reduction as a result of the removal of the DST, these four are almost certainly the largest.” 

A Treasury spokesperson said: “The historic global tax agreement backed by G7 finance ministers reforms the global tax system to make it fit for the global digital age, achieving a level playing field for all types of companies.  

“The deal makes sure that the system is fair, so that the right companies pay the right tax in the right places. 

“The final design details and parameters of the rules still need to be worked through, and the OBR will analyse and publish the fiscal impacts in the normal way.” 

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