Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment her Department has made of the impact of the G7 side‑by‑side approach on the (a) effective tax rate and (b) competitiveness of UK‑headed multinationals.

The Chancellor, alongside her G7 counterparts, has reached an understanding on a proposed path forward for the global minimum tax, Pillar 2 of the G20/OECD Inclusive Framework project on Base Erosion and Profit Shifting (BEPS).

The G7 published a statement on 28 June that set out our commitment to the core objectives of Pillar 2: tackling multinational tax avoidance and promoting a stable global tax environment that supports fair competition.

This understanding also included the removal of the retaliatory tax provision (Section 899) in the US’s legislative proposals, which would have imposed a significant additional tax burden on British firms, and which was causing significant concern and uncertainty.

Recent discussions informing this understanding have taken into account concerns raised by the US Treasury regarding the interaction of the Pillar 2 rules with the US minimum tax system, and have focused on developing a potential approach for the US and Pillar 2 system to sit ‘side-by-side’

The more than 140 members of the Inclusive Framework will now take forward the discussions on this potential side-by-side system, which will include ensuring that multinationals in scope of Pillar 2 and the US minimum tax systems are operating on a level playing field.

The UK has already implemented the Pillar 2 rules, including a domestic minimum tax that will ensure all in-scope groups are subject to a minimum 15% effective tax rate in the UK.