The so-called "Silicon Six," which include hugely-successful and big companies like Apple, Google's parent company Alphabet, Facebook, Microsoft, Amazon and Netflix, have long been accused of avoiding billions of dollars in tax, despite earning a combined trillions of dollars in the past decade alone.
Those companies have armies of lawyers to help them out of even the most dire situations with a very minimum damage.
Inside courts, those companies can be as slippery as a fish.
Realizing that major tech companies are having operations and businesses in many countries, Finance Ministers from Canada, France, Germany, Italy, Japan, the UK, and the U.S., have reached a "historic agreement" to tackle tax abuses by these internet giants, and that they want to introduce a global minimum corporate tax rate of 15%.
At the @G7 in London today, my finance counterparts and I have come to a historic agreement on global tax reform requiring the largest multinational tech giants to pay their fair share of tax in the UK.
The thread below explains exactly what this means. #G7UK pic.twitter.com/HdcK1HuM91— Rishi Sunak (@RishiSunak) June 5, 2021
"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, UK.
"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.
To make this happen, the "first pillar" of the agreement would apply to global companies with at least a 10% profit margin. A 20% tax on any profit above that margin would be reallocated and taxed in the countries where they make sales, Sunak said on Twitter.
The "second pillar" is a commitment to introducing a global minimum corporate tax rate of 15%. This should disincentivize major companies from declaring profits in tax havens, and should also stop countries from trying to undercut each other.
With the agreement, the governments can ensure themselves that tech companies cannot create local branches in countries with low corporate tax rates, and declare profits there.
This is because the agreement is to also ensure major corporations, especially those with a strong online presence, to pay taxes in the countries where they record sales and not just where they have an operational base.
The agreement followed days of talks in London between a number of Finance Ministers from different countries.
Sunak said that he is "proud" of his colleagues that have agreed for working together to produce a deal that "finally brings our global tax system into the 21st century."
The 15% minimum corporation tax should create a "more level playing field for UK firms and cracking down on tax avoidance."