With G7 agreeing to 15% global corporate tax, big tech and multinational giants have little to worry about

By Binoy Kampmark

Wednesday June 16, 2021

Mathias Cormann-Janet Yellen
Janet Yellen with Secretary-General of the OECD Mathias Cormann, in London ahead of the G7 leaders’ summit. (Rob Pinney/PA Wire)

Google, Facebook and Amazon say it’s great; Oxfam and tax associations say it’s absurd and profit-shifting. Binoy Kampmark looks at the G& finance ministers’ tax decision.

In London last week, German finance minister Olaf Scholz suggested the attempt to make global multinationals pay more tax was a train that had started long ago. It would be equally true to say that it has chugged along in fits and starts. Tax havens remain varied and attractive; tech giants with more capital than many a treasury strut the global stage. 

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), launched in May 2019, tried to add stimulus to the idea of a global tax regime. Involving some 140 countries, it suggests reforms supported by two pillars: the distribution of taxing rights and the establishment of a minimum global corporate tax rate.

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Now, the finance ministers of the G7 have reached an understanding that a minimal global taxation rate of 15% should be implemented. The communique also mentions a commitment to reaching “an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable enterprises.”

The various representatives were not shying away from effusive praise. The G7 finance ministers, according to the US Treasury Secretary Janet Yellen, had made a “significant, unprecedented commitment … that provides tremendous momentum towards achieving a robust global minimum tax at a rate of at least 15%.” In her summation, such a global minimum tax “would end the race-to-the-bottom in corporate taxation, and ensure fairness for the middle class and working people in the US and around the world.”

Yellen also spoke optimistically of the levelling effect of such a tax, though this is by no means certain. The measure would aid the international economy to “thrive” by levelling the “playing field for businesses and encouraging countries to compete on positive bases, such as educating and training our work forces and investing in research and development and infrastructure.” Mighty aspirations, indeed.

French finance minister Bruno Le Maire claimed that France could be “proud” in reaching “an agreement on international taxation” for the 21st century. The UK’s Chancellor of the Exchequer, Rishi Sunak, brimmed with confidence that a tax system “fit for the global digital age” was upon us. Scholz was convinced that the deal was “very good news for tax justice and bad news for tax havens”. Beware Google, Facebook and Amazon.

While the various ministers were being self-congratulatory, a few facts were hard to ignore. The rate of 15% was less than that proposed by the White House. Yellen had not managed to convince her colleagues of the higher 21% option. At a press conference following the meeting, the Treasury Secretary tried to show some optimism, saying that “we’ve yet to set the final rate” though the 21% rate was one “that we’ve proposed domestically.” At least reaching an agreement on 15% was “historic”.

The charitable organisation Oxfam was not quite so enthused. Its executive director, Gabriela Bucher, took issue with such a meagre rate, suggesting that the G7 states instead of actually standing alongside the taxpayer had decided to “stand alongside tax havens.” The rate of 15% “will do little to end the damaging race to the bottom on corporate tax and curtail the widespread use of tax havens”. To claim that the G7 had commenced a process to overhaul “a broken global tax system” by means of a tax rate “similar to the soft rates charged by tax havens like Ireland, Switzerland and Singapore” was “absurd”.

The Paris-based Association for the Taxation of Financial Transactions and for Citizens’ Action (ATTAC) called the agreement historic precisely in its lack of progressive reform. Ironically enough, such a rate could actually encourage tax competition and fragmentation, with countries seeking to lower already falling corporate tax rates. The G7 proposals also failed to disclose the mechanism by which the profits of companies exceeding a margin of 10% would be calculated. Applying it to part of the profits would effectively reduce what was taxable. Then there was that old suspicion: that the mechanism of calculation may well end up benefiting wealthier countries to the disadvantage of poorer ones.

The rate was also lower than that recommended by the Independent Commission for the Reform of International Corporate Taxation (ICRICT). The coalition of various civil society and labour organisations has argued that nothing less than a 25% corporate tax should apply “to stop base erosion and profit shifting”.

And what of the corporate giants themselves? Companies such as Google, Facebook and Amazon have become much like city states of wealth, utilising highly beneficial accounting mechanisms to minimise their tax bills. Yet few seemed concerned by the G7 agreement for a new minimum tax rate. Google spokesperson José Castañeda even went so far as to express the company’s “strong support” for the moves “to update the international tax rules. We hope countries continue to work together to ensure a balanced and durable agreement will be finaliSed soon.”

From Nick Clegg, Facebook’s head of global affairs, came the view that the company had “long called for reform of the global tax rules and we welcome the important progress made at the G7.” The understanding reached by the G7 countries constituted “a significant first step towards certainty for businesses and strengthening public confidence in the global tax system.” The tech colossi and other multinational giants seem to have little to worry about.


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