The G7 large economies have a unique opportunity to “fight inequality through regulated, fairer and more equitable globalisation”, as the French put it in January when they took the leadership of this group.
When the finance ministers gather in Chantilly next week, they must press for an overhaul of the international tax system finally to make multinational companies pay their fair share and give governments more financial resources.
In 2013, the OECD group of wealthy nations initiated a series of tax reforms, including improved exchange of information among tax authorities. But that is not enough. Multinationals continue to move profits among their subsidiaries to minimise tax. For example, companies require subsidiaries in high-tax jurisdictions to license intellectual property rights from units located in places where little (or no) taxes are paid. The trick is even easier for digital companies and digital transactions. Economist Gabriel Zucman estimates that 40 per cent of overseas profits made by multinationals are artificially transferred to tax havens.