When one side announces a victory it is usually considered good manners for the other to accept defeat and report a sense of loss and dejection. However, the G7 group of nations, described as an ‘informal club’, but reported about as a heavyweight team big enough to take on the giants of Earth in the shape of ‘Big Tech Operators’, have said they are pleased with the recent tax deal they have struck and, rather suspiciously, their opponents have also announced their delight.
Then again it is also a little surprising that the G7 includes those financial featherweights, Italy (although great food and terrific fashion), but not China or India (pretty terrible fashion but the staple diet of the UK). We have to wait until the seven becomes 20 before we hear the contributions of the world’s second greatest superpower and 1.4 billion ambitious Indians. We also have to ensure that states such as Switzerland, Singapore and our dear friends from Ireland will agree to increase their corporation tax rates, to ensure that Amazon doesn’t announce its new global headquarters in Cork or Borneo, or some such place.
It is said that this whole United tax front was Joe Biden’s idea, coming to him after a nap, but what is going on? High on Billy’s lists of clubs he doesn’t want to join is the G7 group of finance ministers. It is rumoured that at their meetings the snacks are good, but the small talk less than riveting. The G7’s latest meeting in London agreed to battle tax avoidance by making big companies pay more tax in the countries where they do business.
We in the NTI newsroom reckon they could have done this by a swift exchange of emails, as it makes total sense, and all countries want to raise more tax, enabling them to buy tanks and favours for lobbyists. Even those Americans who feature on Facebook claiming they know the capital of Europe to be London know that companies like Amazon and Facebook earn gigantic profits and by claiming they are based in Cayman pay less tax than is universally regarded as fair. You don’t have to wear hemp, carry a placard announcing yourself as a capitalism denier and smell like Amsterdam to carry that flag.
The G7 want to go further. They will aim to make companies pay more tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits. Also, they want a global minimum tax rate so as to avoid countries undercutting each other with low tax rates.
We are getting to the part where the Big Tech operators celebrated the decision in London. The minimum tax rate decided upon was 15%, whereas the rest of us take until about May 20th in each calendar year before we stop working entirely to pay our taxes and start to earn for ourselves. It seems as if Amazon work to pay their taxes until about 3.30pm on February 9th.
One of the stumbling blocks to agreeing even this rather paltry number was that countries regard setting and raising taxes as a sovereign right and don’t want Joe and his team telling them what they can and cannot do. So there was always going to be a big compromise to get this deal across the line. A minimum corporation tax rate of 15 pre cent is rather low. Although European finance ministers succeeded in including the phrase "at least 15%", which offers a path to get that number higher.
If you woke up this morning to discover you ran Apple you would consider the ‘landmark deal’ struck by G7 as a bit of a winner (because although you will end up paying more tax - which, to be honest, you always knew would happen - the number is way smaller than you had feared). It is like waking following a massive blowout when all you can remember is the word tequila, a roundabout, lots of blue lights and a monkey, to discover you are still alive, not in prison and can count a minimum of three limbs.