Unprecedented. Seismic. World-changing. The finance chiefs of G7 countries reached for superlatives as they hailed Saturday’s corporate tax deal. After nearly a decade of talks, it is a remarkably bold plan. But expectations of a massive tax windfall are misplaced.
The accord has two components. One aims to address the race to the bottom on tax rates by imposing a global minimum corporation tax on large companies. The second component would require the largest, most profitable companies to pay more tax in countries where they make their sales. A fifth of their global profits above a 10 per cent profit margin would be reallocated in this way.
Big companies should be braced for higher tax bills. But by how much? Some big numbers are doing the rounds. EU multinationals would have to pay about €50bn or 15 per cent more in taxes globally, according to the Paris-based EU Tax Observatory. Similarly, the UK would collect an extra £7.9bn, according to the IPPR think-tank.