The historic deal signed this weekend is intended to prevent digital companies such as Google and Facebook from playing a cat-and-mouse game with national tax authorities.
G7 finance ministers have established a minimum global corporation tax rate of 15% – a rate that can ultimately be applied by all nations. One that they believe tackles the huge inequalities between the major, mostly US digital firms, and the rest of the business community, a divide that has been made worse during the pandemic.
Words like “historic” and “landmark” are being used here because international tax deals are rare – and usually scuppered by countries that either charge low levels of tax, such as Ireland, Hungary and Cyprus, or that have close ties to tax havens, such as the UK and the Netherlands.
It is a stark contrast to a year ago, when Donald Trump’s White House team was fighting at every turn against proposals put forward by the Paris-based Organisation for Economic Cooperation and Development (OECD) for a global corporate tax rate.
Trump supported low taxes on corporations as a matter of principle but also wanted the likes of Amazon, Apple and Google to dominate the world, in order to prevent Beijing from exercising its growing strength in digital services.
With Joe Biden installed as US president, the situation has turned 180 degrees. With a tailwind of support for higher taxes on corporations and the super-rich to pay for his recovery programmes, Biden embarked on an ambitious…