The G7 tax deal, signed at the weekend, had the aim of ending the 'race to the bottom' in corporation tax rates, which has seen them fall considerably in recent decades, with the resulting tax burden being shifted onto working people.
The 'bottom' when it came to corporation tax was zero per cent - the rate offered by the likes of Jersey, Catman and the other UK linked tax havens.
15% was meant to set a floor over that low rate below which rates should not fall. But this move has now been seized on by some right-wing campaigners - in Denmark, Finland and Australia so far, and no doubt spreading to the UK soon - to say that 15% is now the desired global tax rate - and that they must cut their domestic corporation tax rates to suit.
This is not true. The G7 said:
We strongly support the efforts underway through the G20/OECD Inclusive Framework to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax.
They added:
We also commit to a global minimum tax of at least 15% on a country by country basis.
They set a minimum tax rate. They did not set a desirable tax rate.
They got the minimum wrong. It is far too low. It would be dangerous for use in the UK given the amount of tax avoidance it would give rise to, being way below our income tax rate.
I hope the repercussions are not too serious, but no doubt Sunak will be talking 15% as a target very soon.
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Great stuff, Richard.
I am writing from Ireland where the tax rate is supposedly 12.5% but many rebates, etc, mean the effective rate is closer to 8%. And the Goverment even ‘go out to bat’ for the likes of Apple’s right to not pay tax of course. I think a minimum 15% rate will seem disconcerting high for the political class here!
So far here the media has been extremely quiet on all this. I have seen murmurings of losses of a few billion in tax, but little else.
There is never any discussion of what our ‘beggar thy neighbour’ economic approach means for our EU brethren. Nor of the knock-on economic effect of the torrents of completely unearned money rushing through the country create for us. The situation is quite lopsided internally after 25 years of this. We continue to be well behaved and are careful not to put any uncomfortable questions to our corporate masters nor political minders!
And I don’t expect it to change.