A Global Tax Deal for the Rich, Not the Poor
Despite the recent G7 agreement on corporate taxation, global leadership requires going beyond national interests to ensure that all countries have sufficient resources to develop healthier post-pandemic economies. This will require addressing the developing world’s demands in a way that is not only historic, but also fair.
NEW YORK – Historic, game-changing, revolutionary: such has been the widespread reaction to the recent agreement by G7 finance ministers on a global minimum effective tax rate of “at least” 15% for large multinational firms. The ministers also agreed on a new formula for apportioning a share of tax revenues from these companies among countries.
But whatever global tax deal eventually emerges should reflect the interests of the world – including the developing countries – and not just those of seven large, developed economies. The developing world relies more heavily on corporate tax revenue and has thus been hit harder by multinationals’ tax avoidance, which results in global revenue losses of at least $240 billion each year.
Many developing economies – and low-income countries in particular – are not even taking part in the negotiations on the wider OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. Those participating have been represented by the Intergovernmental Group of Twenty-Four and the African Tax Administration Forum (ATAF), which coordinate the positions of members that are active in the negotiations. Some G24 members, including Argentina, Brazil, India, Mexico, and South Africa, are also in the G20.