G7 tax agreement provides level playing field-UK's Rishi Sunak says

G7 Finance Ministers meeting

Rishi Sunak welcomes Kristalina Georgieva from the IMF to the meeting in London

Treasury chief Rishi Sunak said finance ministers from the Group of Seven leading industrialized nations signed the pact on the second and final day of meetings in London.

The meeting of finance ministers came ahead of an annual summit of G-7 leaders scheduled for June 11-13 in Cornwall, England. But it smooths transatlantic tensions that undermined efforts for years and paves the way for a broader accord by the Group of 20 as early as next month. It also supported awarding countries the right to tax 20% or more of profit exceeding a 10% profit margin.

Overnight in London, the G7 hopes to seal an agreement to stop big multinational companies from exploiting tax loopholes.

The United States is also holding out for an immediate end to the digital services taxes levied by Britain, France and Italy, which it views as unfairly targeting USA tech giants for tax practices that European companies also use.

The social media giant welcomes the progress made on a minimum tax rate and accepts this could mean it pays more tax, and in different places, its head of global affairs Nick Clegg said on Saturday.

Yet the ministers the United Kingdom and France both claimed tech giants would be in the cross-hairs of new rules.

British Chancellor of the Exchequer Rishi Sunak, the chair of the G-7 meeting, said in a Twitter video message that the G-7 nations have reached a "historic" agreement to reform the global tax system "so that the right companies pay the right tax in the right places".

"We are in favor of retaining the policy of setting the tax rate as a national competency, maintaining a level of corporate tax rate suitable for the sustainable development of the economy and investments", Petrides said, according to The Guardian.

Worldwide discussions on tax issues gained momentum after U.S. President Joe Biden backed the idea of a global minimum of at least 15% - and possibly higher - on corporate profits.

Any deal would still need much wider global buy-in, at a meeting of the G20 in Venice in July.

A deal could raise tens of billions of dollars for governments, offsetting the big spending done by many governments to prop-up their economies during the health crisis.

A report in the Guardian this week said an Irish subsidiary of Microsoft made a profit of $315 billion past year but paid no corporation tax as it is "resident" for tax purposes in Bermuda.

Still undecided are the technical details on how exactly how exactly to share the spoils of taxing tech companies. Saturday's agreement says only "the largest and most profitable multinational enterprises" would be affected.

Defining that list of firms has always proved tricky because of the US refusal to ring-fence tech companies in the new rulebook.

In New Zealand, Google now pays much less than that.

Part of the agreement is that countries such as France that have imposed digital services taxes would remove them in favor of the global agreement. Resolving the exact sequencing of that could prove tricky with countries unwilling to give up revenues from their unilateral measures before they have certainty over what they will gain from new global rules.

In recent years, some governments have called for the likes of Facebook and Google to pay more taxes in the countries they operate in and when they benefit from people using their services.

German Finance Minister Olaf Scholz called the deal "very good news for justice and fiscal solidarity".

"However, fixing a global minimum corporate tax rate of just 15 percent is far too low". A worldwide deal for 15% could help him because it offers multinationals options.

The worldwide taxation issues have been discussed at the multinational negotiations taking place under a project led by the Organization for Economic Cooperation and Development, and the Group of 20 major economies, involving almost 140 countries.