About That G7 Corporate Income Tax Deal

by

Prodded by President Biden and Treasury Secretary Janet Yellen, the finance ministers of the G7 nations reached an agreement over the weekend that multinational corporations must pay 15 percent of their profits in taxes, no matter where they are located, and no matter what kind of creative bookkeeping they engage in.

This ought to be cause for celebration. For me, it is one more reminder of just how pitiful was the leadership of Bill Clinton and Barack Obama.

This deal could have been had anytime in the past three decades. All it took was American leadership.

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Instead, Clinton working with his neoliberal crony Tony Blair of the U.K. cooked up an elaborate choreography under the auspices of the OECD to crack down on some offshore havens to require greater reporting. This consumed endless bureaucratic meetings and draft policy papers and in the end achieved exactly nothing. The game of shifting where profits were booked continued, and some of the largest multinationals managed to book profits nowhere and to pay taxes to nobody.

Also missing from the Clinton and Obama efforts to address tax evasion was any discussion of the race to the bottom in tax rates. In a competitive frenzy to attract industry, competitive cuts in corporate rates continued.

It is only against this pathetic history that an agreement to require a true minimum rate of 15 percent and to end competitive rate-cutting looks like an achievement. It’s also noteworthy that the other major G7 nations—Britain, France, Germany—are all governed by conservatives. Yet once the U.S. led, they all went along.

With the G7 deal, the devil is still in the details. Ireland, with very low tax rates, is not in the G7. How to bring Ireland along?

How exactly to define and enforce the accurate booking of corporate profits? And there will still be conflict between the U.S. and the EU over the nature and level of corporate taxes above the minimum, especially when it comes to tech.

Biden and Yellen deserve credit for leading. Clinton and Obama get the booby prize.

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