G7 Countries Meet to Shake Up Tax Rules

In mid-June, the leaders of the Group of Seven economies, or G7, met for a three-day summit in the UK to discuss a variety of challenges facing the planet and its many economies.

This meeting hasn’t happened in-person for two years, providing a prime opportunity for the leaders of the G7 countries to meet face-to-face to discuss how to rise from the ashes of the Covid-19 pandemic. It’s one of the most important meetings for the globe’s most advanced economies to come together and plan recovery strategies. The G7 countries include the UK, Canada, France, Germany, Italy, Japan and the United States, representing more than 60% of the people living in democracies worldwide, which equates to more than half of the world’s economy. The G7 summit covered such topics as the vaccination, climate change, cyber-attacks in Russia and the war in Ethiopia. However, taxes on multinational corporations has been one of the most headline-making concepts covered by the G7 countries in this year’s summit. iFOREX News took a deeper at the solutions proposed by the G7 and how they may affect these behemoth companies going forward.

Big tax changes

The group has decided on a minimum tax of 15% for corporate companies overall, in an effort to combat the issue of multinational corporations evading tax by storing their profits in low rate countries, or playing countries off one another to lower their taxes. For example, Ireland has quite a few large multinational headquarters located in the country, particularly US tech companies like Google, due to the fact that Ireland offers a lower corporation tax rate of 12.5% versus the UK’s 19%. Tech companies stand to face a huge impact from this new taxation because they can easily move between countries around the world and have used this tactic to their advantage to base themselves in places with lower corporate tax rates, but this will no longer be the case with the 15% baseline tax. If this goes according to plan, some tech companies may owe governments billions to pay off the debts that were racked up during the pandemic.

iFOREX  News also learned that another tax decision will require the world’s largest companies to pay taxes in countries where they are making sales but have no actual headquarters. This could have a significant impact on many US-based tech companies like Amazon, Google and Facebook, who have been profiting in a big way since the start of the pandemic, yet still have negligible tax. The meeting was hosted by Britain’s Treasury chief Rishi Sunak who commented on the tax decision, saying that it would “Reform the global tax system to make it fit for the global digital age and crucially to make sure that it’s fair, so that the right companies pay the right tax in the right places.” As it stands currently, companies can earn billions in some countries and pay very little tax there, while locating their headquarters in countries that have lower tax brackets, and instead take their profits in those countries. An example of this is Facebook, which has its European headquarters in Dublin, but having earned £1.65 billion in revenue in 2018 in the UK, only paid £28.5 million in tax to the UK. The new tax deal decided on by the G7 countries will require these companies to pay tax in any country where they earn profits of more than 10% on their sales.

Tax impact on the markets

It remains to be seen how these new taxation rules will impact the share prices of Google, Facebook and the other huge multinational companies. The future could see the type of volatility that presents both opportunities and risks for CFD traders. CFDs, or Contracts For Difference, allow you to take advantage of price changes in both directions—increases as well as decreases—of the share prices of a wide variety of companies including Google and Facebook, without having to purchase the underlying asset (in this case any actual shares).

iFOREX  is a leading broker offering hundreds of CFD instruments including shares of top tech companies, commodities, ETFs, global indices, and foreign currency pairs. The iFOREX  trading platform comes kitted out with a huge selection of advanced trading tools and features including trading signals, market alerts, analysis charts, live rates, and built-in risk-management tools, in addition to regular articles from iFOREX News. You may have heard of iFOREX after doing a review of regulated broker platforms, as the brand stands out for its commitment to empowering traders with the knowledge to make more informed trading decisions. Join iFOREX today and start with a free educational intro pack. 

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