Global Tax Reform Deal: APPG Reaction

For many years the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax has been calling for an end to the race to the bottom on global tax. For too long huge multi-national companies have been hiding their profits in complex structures to exploit lower rates of corporation tax, or shifting their money to offshore tax havens and paying as little as possible in the countries where people actually buy their goods and use their services. Finally, this has been the year when the world’s political leadership, led by Joe Biden, and building on the discussions at the G7 in July, have come together to say enough is enough.

The OECD Agreement published on Friday 8th October set out a ground-breaking and historic international effort to build a fairer global tax system, backed by 136 countries representing over 90% of the world’s GDP. For the first time there is to be a minimum level of corporation tax to put a floor on countries trying to undercut each other, and the largest and most profitable multi-nationals will see their taxes distributed more fairly in the countries in which they operate.

Of course there are limitations and shortcomings with the agreement. Only around the top 100 companies will see their profits reallocated, there are too many exemptions and carve-outs, and it is not even clear if the big digital companies - like Amazon and Google - will actually end up paying more than they already do under the Digital Services Tax. It is not clear that developing countries will benefit as much as they should and there is still a long way to go to ensure those at the top table are not reinforcing global inequality. Moreover, there can be no doubt that 15% is still far too low for a global corporation tax level.

However, these agreements have been a long time coming. We have been calling for action for many years and it is right that we welcome the very first real steps to bring the global tax framework into the digital age. This is a ground-breaking deal, but must only be the first rung on the ladder. These agreements must be built on year-on-year as a foundation, and alongside this we must see greater transparency to ensure we can have faith in the system. There is much more to do, but the framework is becoming clear and, as we all look to rebuild from the ravages of COVID, public finances have rarely been more important. We must all now keep this issue high up the agenda to keep working towards a fairer global system.

Anna Turley, APPG Campaigns Manager