Finance ministers from G7 countries gathered in London on Saturday to declare victory over corporate tax avoidance.
They have designed a deal that claims tax-dodging firms will now have to pay more.
But don’t believe the hype. This scheme is less about taxing greedy corporations and more about benefiting the rich countries that are part of the G7, who are meeting in Cornwall this week.
The agreement supposedly means that companies will have to pay an “unprecedented” global minimum of 15 percent in corporation tax. The largest companies will have to hand over 20 percent.
It also means these corporations have to pay tax in every country they operate in, not just where their headquarters are.
Tory chancellor Rishi Sunak described the deal as “a proud moment.”
But the actual plans are far less impressive.
Firstly, most of the countries in the G7—and most of the countries in the world—set corporation tax above 15 percent.
Britain’s corporation tax is already 19 percent and is set to rise to 25 percent by 2023.
According to the Tax Foundation, the global average corporation tax rate is 23.85 percent. So for many corporations nothing will change.
Oxfam’s executive director Gabriela Bucher blasted the G7 for claiming to be “‘overhauling’ a broken global tax system”.
Bucher added that the new tax rate “is similar to the soft rates charged by tax havens like Ireland, Switzerland and Singapore.”
Fine details of the plan haven’t been revealed, and the agreement will be further discussed by G20 finance ministers in July. But it is set to hit poor countries harder, while richer ones pocket the benefits.
Marxist economist Michael Roberts said, “It seems that sales will be defined as where they are exported not where they are consumed, thus hitting poorer countries and actually boosting profits to G7 nations.”
The scheme also has major loopholes that means some of the richest companies won’t have to pay.
The deal states big companies will have to pay 20 percent corporation tax if they make profits above the 10 percent mark of their sales.
Businesses will be able to reorganise their affairs to protect their profits and remain under the 10 percent threshold.
Last year Amazon only reported a 6.8 percent profit margin, which currently means the company would be exempt under the new deal.
And the G7’s new tax plans won’t work for companies who operate to hide revenue through business structures that are not transparent.
Companies also use a complex system of offshore accounts and tax havens to avoid paying any tax.
Confronting these problems would mean not just tax reform but taking ownership and control of the economy back from the elites.
Prioritise poverty, not police
The cost of protecting world leaders at the G7 summit in Cornwall will be £70 million or more.
Steel fences have already been put up around the five-star Carbis Bay Hotel where the summit will be held.
Devon and Cornwall police will be joined by 5,000 extra officers from around Britain.
Many campaigners are angry the Tories are happy to spend millions on the summit while Cornwall remains one of the poorest areas in Britain.
A recent report found that one in five children in Cornwall live in poverty.
House prices in the county have soared in the past year, but average wages are much lower than in other parts of Britain.
One resident of Pengegon estate in Camborne, near Carbis Bay, said, “Cornwall is the end of the line—we are always forgotten.”
Another said the G7 preparations showed there is “one rule for them and another for us.”