The single biggest change in a century to international tax rules will be discussed this weekend at an annual meeting of the G7 – a club of the world’s seven largest economies: Canada, France, Germany, Italy, Japan, the UK and the US.
The G7 will seek an agreement on implementing a global minimum corporate tax rate on multinational corporations. The proposal, which recently went from the fringes of tax justice advocacy to the top of the G7’s agenda in the span of just two months, has the potential to recover hundreds of billions in underpaid corporate tax and put an end to the “race to the bottom”.
The Tax Justice Network will be publishing below responses and updates on key developments throughout the week.
🔴 – Live updates
6:18pm GMT Tuesday 1 June 2021 – New report reveals US Company ViacomCBS underpaid at least $4bn in corporate tax in the US
The Centre for Research on Multinational Corporations (SOMO) has just published a report showing that for almost two decades, ViacomCBS has been using the Netherlands to avoid paying at least US$4 billion in corporate income tax in the United States. From 2002 onwards, the media conglomerate has been sublicensing its television rights to third parties and consumers outside the North American market via the Netherlands. In total, at least US$32.5 billion in revenues have been collected by the company’s Dutch subsidiaries during the period 2002-2019.
The report is extensively covered in a New York Times article titled “SpongeBob and ‘Transformers’ Cost U.S. Taxpayers $4 Billion, Study Says“, which draws attention to how US President Biden’s proposed tax overhaul could prevent ViacomCBS and other large corporations from abusing tax.
5:30pm GMT Tuesday 1 June 2021 – Renowned economist Joseph Stiglitz pens FT piece calling on European economies to support the global rate
Ahead of the G7 meeting this weekend, Joseph Stiglitz, a recipient of the Nobel Memorial Prize in Economics and commissioner on the Independent Commission for Reform of Corporate Taxation, has calling in an article for the FT on European economies to step up and support a global minimum corporate tax rate.
Stiglitz writes: “The leaders of the G7 can either be a force for change or they can reinforce the status quo. The US has made the right move. Now it is Europe’s turn to take its responsibilities seriously and ensure the winners from globalisation contribute to the wellbeing of future generations.”
Read the article here.
5:15pm GMT Tuesday 1 June 2021 – WEF summit session on global minimum tax held today
The global minimum corporate tax rate is the subject of a session at the World Economic Form’s The Jobs Reset Summit today, where Tax Justice Network CEO Alex Cobham is speaking, along with Alicia Bárcena Ibarra, Executive Secretary, United Nations Economic Commission for Latin America and the Caribbean (ECLAC), and Stephen Carroll, Senior Business Editor at France 24.
Echoing the growing consensus in support of a global minimum corporate tax rate, the session summary reads:
After decades of a ‘race to the bottom’, major economies are now backing a global minimum tax estimated to bring in $100 billion in new revenue annually. How can international tax reform contribute to a more sustainable, equitable economic recovery?
Here’s a clip from the session featuring Alex Cobham:
The session is running now from 6pm to 6:30pm CEST can be watched live here.
2:30pm Tuesday 1 June 2021 – Draft G7 agreement shown to Reuters
A draft G7 communique shared with Reuters shows the intention to delay meaningful decisions on the global minimum corporate tax rate to July this year, when the G20 will meet.
Alex Cobham, chief executive at the Tax Justice Network, said:
“The draft G7 statement tabled by the UK would kick all the details of the global minimum corporate tax rate to a G20 meeting in July. It’s unclear at this stage whether other G7 members will support this, or insist the UK stop holding up urgently needed global progress.”
10:00am GMT Tuesday 1 June 2021 – Background information
Ahead of this weekends G7 meeting, here are a few points on why this weekend’s G7 meeting is so significant:
- Regardless where G7 members land on the rate for the global minimum tax, this marks an important steps towards cementing a global consensus in support of tax justice policy platform. A global minimum tax rate is the latest in a series of tax justice policies that were initially dismissed when first proposed by tax justice campaigners only to become international norm in recent years. This includes automatic exchange of information, beneficial ownership registration and country by country reporting.
- US President Biden’s push for a global minimum corporate tax rate, and the support it has so far received from most G7 members, has effectively called time on the sacred narrative of “tax competition” – a deeply incorrect analogy that has been used for decades to sugar-coat harmful tax cuts and deregulations, and to spur countries into a “race to the bottom”.
- Anywhere between $200bn to $400bn of additional tax revenues is on the table. While a global minimum corporate tax rate set at 21% implemented under the METR proposal up to $640bn in underpaid corporate tax from multinational corporations, compromise among the G7 members is expected to reduce the potential benefit of the global rate. Nonetheless, a total of $200bn to $400bn in additional revenue per year for countries can dramatically change the lives of billions of people.
However, there are some areas of concern the Tax Justice Network will be monitoring.
- The US has already signalled a willingness to consider the low rate of 15% for the global tax instead of the 21% the US initially proposed. The low rate not only leaves hundreds of billions of unpaid corporate tax on the table but risks leaving the race to the bottom alive and kicking.
- If the G7 go ahead with a global rate on the basis of the OECD blueprint, they will take a disproportionate amount (more than 60%) of the revenues for themselves – despite the fact that it is lower income countries that lose out most heavily in terms of the share of tax revenues lost to corporate tax abuse.
- The METR proposal delivers a much fairer distribution of recovered tax, providing lower income countries with double the amount of tax revenue they would recover under the OECD blueprint. Implementing the METR proposal for the global minimum rate would recover the equivalent to 36 per cent of the combined public health budgets of lower income countries.
- There are concerns about other more specific limitations and exceptions, like patent boxes, expected to be discussed at the G7 meeting that could unfairly limit lower income countries’ industrial strategies while failing to deter tax abuse mechanisms.
- All these above concerns only compound to confirm that having international tax rules set by a small club of rich country is entirely inappropriate and unjust. OECD countries are responsible for over two-thirds of global corporate tax abuses documented by the Corporate Tax Haven Index 2021. At the same time, the OECD blueprint from the global minimum corporate tax will see OECD countries collect a disproportionally larger share of recovered corporate taxes – which they enable multinational corporations to underpay. It’s not a shocker to see a club of rich, tax abuse enabling countries put forward a plan to end the race to the bottom that excessively rewards themselves, the worst perpetrators of the race to the bottom. Tax sovereignty requires globally inclusive setting of tax rules, through an intergovernmental tax body under UN auspices.
Here’s is some helpful reading material to get up to speed.
- Our analysis of how much each country can recover in underpaid corporate tax under a global minimum corporate tax applied under the OECD and METR proposals. You can view the country figures in this table here.
- The IMF joined growing consensus for tax justice last week in a report in published calling for both the global minimum corporate tax rate and public country by country reporting to be implemented hand in hand. Our Director of Human Rights and Tax Justice Liz Nelson, who was invited to speak on the report at an event hosted by the European Parliament Subcommittee on Tax Matters issued a statement here.
- An explanation of the METR (Minimum Effective Tax Rate) proposal by Sol Picciotto, Coordinator of the BEPS Monitoring Group, emeritus professor of law at the University of Lancaster in the UK and Tax Justice Network senior adviser, is available here.