Once implemented, tech giants like Amazon and Meta née Facebook will no longer be able to make profits in low-tax countries, but will have to pay taxes in countries where their goods or services are sold, even if they do. are not physically present. This will negatively impact long-standing reluctance against the deal, such as Ireland, which sought to attract investment and jobs by taxing multinationals slightly, and will benefit countries like India that contribute significantly. customers of these tech giants but get very little tax revenue.
But before singing hosannas to the accord and the G20, a forum covering 60% of the world’s population and 80% of global GDP, a few words of warning. First, the agreement only sets a floor. So this will not end tax competition. Second, like all multilateral agreements, whether on climate change or global trade, implementation will be a huge challenge, all the more so given the track record of the G20.
G20, says its homepage, was “born in 1999 [in the wake of the 1997 economic crisis] as a forum for consultation between finance ministers and central bank governors of the world’s major economies ”. But it only gained momentum after the 2008 global financial crisis when the United States, under George W Bush, offered to institutionalize it as the primary forum for global economic and financial cooperation and raise the level of participation at the level of heads of state. and the government. Why? Not because the United States suddenly realized the importance of multilateralism, but because it needed the world to bail out its economy through coordinated fiscal and monetary policy easing, on a global scale.
Talking Shop, Photo-Op Since the US economy recovered, the G20 has once again become just another talk shop, a photo op for world leaders. Although they have met every year since 2010 and each summit has ended with the issuance of noble communiques, these have not meant much in concrete terms.
Take the communiqué issued in 2012 following the meeting in Los Cabos, Mexico: “Despite the challenges we all face at the national level, we have agreed that multilateralism is of even greater importance in the climate. current and remains our best asset to solve the global problem the difficult economy. Truly?
If there ever was a case for multilateralism, it was in 2020 when the world was battling the Covid-19 pandemic. But unlike the post-GFC, where two summits – the first in London and then the next in Pittsburgh – took place in 2009 and concrete action plans drawn up, in 2020 it was every man for himself. As country after country closed their borders and advanced economies monopolized vaccine supplies for their own citizens, it was clear that “multilateralism” had been abandoned.
Locked lip service
Never mind the words spoken in favor of multilateralism since the first summit in 1999 in Berlin. The Riyadh summit in November 2020 saw the same thing: “We are united in our conviction that coordinated global action, solidarity and multilateral cooperation are more than ever needed today to overcome current challenges…. We will spare no effort to ensure [distribution of safe and effective Covid-19 diagnostics, therapeutics and vaccines] their affordable and equitable access for all… ‘
The sad truth is that the only time the G20 has kept its promises is when the interests of advanced economies, especially the United States, have been threatened after the GFC – with urgency. But slow-burning crises like climate change, inequality, tax evasion that affect global well-being, rather than America, are not breaking the ice.
So, for all the cheers that have greeted the global tax deal, the reality is that we probably won’t get very far. Only when the advanced economies, also signatories to the agreement, adapt to the talk and crack down on tax havens in their own territory. An unlikely prospect.
Wilmington (home of Joe Biden) in Delaware, for example, is widely recognized as an onshore tax haven. A single building in Wilmington would house no less than 300,000 businesses. Likewise, the British government has always turned a blind eye to tax havens in its overseas territories and crown dependencies such as the Isle of Man, the Cayman Islands, Guernsey, Jersey and Bermuda.
As India prepares to take on the mantle of the G20 presidency in December 2022, it’s important to get real. Lobby for the implementation of the tax agreement. But remember, Rome wasn’t built in a day. Like the city in which the agreement was signed, it will be a daunting task. The trick is to keep talking.