The FT has reported this in the last couple of hours:
Thank goodness, and congratulations to all involved, say I.
I am well aware that the deal in question is less than ideal. It favours developed counties. It does not include enough companies. The tax rate is too low. The amounts of tax to be apportioned are too small. There are numerous reasons to be critical of it. I am. I hope for reform, still.
However, it's easy to be critical. Let's talk about the pluses. There are aspects to this deal that are extraordinary. First, 130 countries have signed up to this. That is already surprising. And the holdouts are all the usual culprits, and very largely rather obvious tax havens.
Second, the deal does something unprecedented: it creates the international legal precedent to deliver a global minimum tax rate. It does so without violating the rights of any state (although some will argue otherwise, but the way it is constructed permits my claim). And that global tax rate is likely to be effective.
Third, this deal is deeply threatening to tax havens: the zero rate taxes that they offer cease to have appeal for large corporations as a result of this. If that is not of note, what is?
Fourth, this will increase global corporate tax takes. That is good news.
Fifth, and of massive significance, the behavioural impact of all this is dramatic. It hits some very particular types of tax planning and the culture that has supported them very hard. It can be argued it could hit them harder. I agree, it could. But to suggest that this will not change the culture of tax planning would be entirely wrong. It will, and likely as much as it changed when in 2012 Margaret Hodge tore Google, Amazon and Starbucks to shreds in Parliament.
Finally, of course the deal is not good enough, but I have said the same of every OECD led deal to date. They have never delivered all I want. I put it on record now that the 2015 BEPS deal was really quite disappointing at the time, and I had worked very hard to deliver it and country-by-country reporting. I am sure I said so. But now we have another deal. And that is the way that it always works at the OECD. The next negotiation begins as soon as the ink is dry on the last one. And I am certain this is already the OECD's plan: they will also be unhappy with this deal, of that I am sure. They too know it is not all that is needed. But within the constraints of the global political economy this is what could be achieved now. That is the fundamental reality of what has happened here. And as a realist, I welcome this deal. And I will welcome the next round of talks as they move to make further progress in the way that no one else is able to do.
I am also well aware that many in tax justice will not agree with me for saying that, though. But I think they are wrong. I may have more to say on that, soon.
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‘And the holdouts are all the usual culprits, and very largely rather obvious tax havens.’
No they are not. All the ‘usual’ tax havens are on board.
It is only Ireland, Hungary etc. [Please: when was the last time you suggested Hungary was a tax haven?!?!?] that are not, and quite rightly so: with the EU trying to adopt OECD rules onto EU countries by force. Also: back in the 1990s, it was Bermuda, Cayman, Isle of Man that got on board with the OECD project on harmful tax practices. Little is said about the fact they have been there from the beginning, and if it wasn’t for this small group of so called ‘tax havens’, then there would not be the ‘Inclusive Framework’ that we have today. Analyse that as you will. But the facts don’t lie.
What you say does not in any way change my position
Actually, the exceptions are Kenya and Nigeria
Those I acknowledge are not tax havens
They don’t like the deal for Africa. And I agree it is not good. But I am certain anything better would not get through Congress. That’s the problem with political economy. Compromise happens. It’s the real world. It’s messy and not fair. Nor is it fixed. There is no equilibrium. There is just next time when it will be better.
“There is no equilibrium”. The truth of that observation is completely lost on neoliberal economists and their dog-whistle acolytes. You do whatever you can for the best; and when you discover that you are faced, not with spaniels but rottweilers, however well domesticated their neglectful owners cynically claim them to be (and we already know will disown all responsibility when it all goes wrong), this may be the best you can achieve in a naughty world.
I may have over-exhausted that metaphor, but day and daily we see in Britain a government acting to standards that are little better than that evinced by a pack of feral dogs; but a Government which has post-Brexit suddenly discovered that it can “get away” with just about anything; and may not only abandon even the appearance of possessing any standards of obedience to the public good, but can actually publicly flaunt their uncultivated neoliberal greed at little political cost, provided only that it is crudely dressed as the best of the buccaneering British spirit, preferably when wrapped in the Union Jack.
It used to be the English Cross of St.George that was the the flag only too easily associated with the far right in Britain. I confess I am no football fan, but I understand that Mr Southgate and his generous spirited, multi-ethnic squad have now triumphantly rescued that symbol from its squalid historical misuse. It is the Union Jack that is now, it seems a much better representation and symbol of the imminent presence of the cold-blooded far right in Britain. Such is the nature of “progress” in the hands of neoliberal Conservatism.
Thanks
How could the EU adopt rules “by force”? What does that even mean, in the context of a legal structure with well developed mechanisms to take positions, and make and implement decisions, at the European Commission, Council and Parliament? What “force” is the EU going to deploy against the holdouts? Is there a shadow army of “blue shirt” zealots that will be sent out to invade, arrest, and beat them up?
Or do you just mean that decisions will be made collectively by EU member states using the appropriate legal mechanisms, passed into law, and then enforced using the EU’s legal structures? A similar sort of coercion that is applied to the members of a club to obey its rules?
Precisely
Civil society is also claiming the OIECD can impose deals
That is even more absurd
Apart from VAT, the EU members have sovereignty over tax issues, but current EC attempts, now that the Brits have left, are to push QMV on tax. That is the force bit. And the tax issue has been played over and over and over again in Brussels since the early 1980s. It is currently EC nil, member states about 40. If Dublin is sensible, it will do what Bern and Luxembourg did in 1998 in Paris. So the ‘force’ bit is not about gunships or blue shirts but about the tradeoff: will Dublin take an anti-QMV on tax stance after weighing up the pros and cons of doing so as maintaining membership of the EU club? Or more importantly, is Dublin gambling on the internal politics of the U.S.? And even more importantly, to what extent do the internal politics of the U.S. matter to the rest of the world? More so in 2000; less so in 2020. Just as the EU’s weight in global politics diminished in 2020 after the U.K. left. Four and a group of minnows became three and a group of minnows. The question for Dublin is: is Ireland better off outside the EU or in? Adopting OECD rules by choice, outside, or by force, inside? Force is the right word. Coercion probably a better one.
You known the OECD is not the EU?
You know that the US can apply pressure whether in or out of either?
You know Ireland knows it has backed a dead horse now?
Stop the silly banter – what are you saying when the crap is cut out of what you are suggesting?
It is up to the EU and its members states to decide which matters are subject to veto and which are subject to qualified majority voting. If the Irish (and indeed every other EU member state, from Cyprus and Malta and Luxembourg to Poland and Hungary) wish as a political matter to give up their national veto because they get something of value in return, who in the UK is in any position to gainsay it?
Tabling a proposal and discussing it – that is, politics by usual means – is not force and it is hyperbole to suggest so.
In any event, 22 of the 27 EU member states are already members of the OECD – including Ireland, Luxembourg, Poland and Hungary. The 5 exceptions are Bulgaria, Croatia, Cyprus, Malta, and Romania, but most of them have evinced an intention to join the OECD at some point.
[…] As has become apparent over the last week or so, I am increasingly critical of the current direction and focus of the tax justice movement. I have already published one blog that has been critical of the Tax Justice Network’s (TJN) approach to the Biden led global tax plans that have now won G7 and G20 support. […]