G7: More urgent action needed to make a fair corporate minimum tax a reality

The proposed 15% Global Corporate Minimum tax agreed upon by G7 Finance Ministers is a move in the right direction – but unless the rate is raised many corporations will continue to dodge their fair share.

PSI and its affiliates have long campaigned for global corporate minimum tax and welcomed the move that, if implemented, could help end the race to the bottom that has starved public services and forced privatisations for too long.

However, PSI warned that the failure to support a more ambitious minimum rate risks creating a “race to just above the bottom” and called on G20 countries to show leadership by making more ambitious unilateral commitments. PSI has long led the campaign for a global minimum corporate tax rate of at least 25%

Rosa Pavanelli, General Secretary of PSI said:

“By agreeing on the low 15% minimum, G7 leaders have chosen to forgo hundreds of billions of dollars in potential corporate tax revenue, right at a moment where our public services face their most severe funding crisis in a generation. In such circumstances nobody can call for new austerity measures.

Workers across the world have paid their fair share – now it’s time for the world’s wealthiest corporations to do the same.

Research from Tax Justice Network shows that a 25% minimum effective tax rate could raise $780bn in additional revenues worldwide. An alternative, fairer model for revenue-allocation proposed by civil society (known as METR) would provide non-G7 states with an additional $355 billion.

PSI’s Assistant General Secretary and Head of Policy, Daniel Bertossa said:

“The proposed rate of 15% is only just above the 12.5% rate of tax havens like Ireland and well below the US proposal for 21%.

There is a real chance to raise the revenue needed but G20 countries must make more ambitious commitments.

The initial resistance from European governments to set a minimum above the 12.5% of EU tax havens like Ireland and Cyprus has undermined Bidens push for 21% and is well short of what is fair to workers and those who pay their fair share.

Daniel Bertossa said:

“Now that there is political agreement amongst the largest global economies that we will have a global minimum corporate tax, attention in the lead up to the G20 must turn to the rate and how the extra income is distributed.”

José Antonio Ocampo, Professor at Columbia University and ICRICT Chair noted that countries can unilaterally raise their own rate. He said that the USA has committed to this already and that:

“Once a global floor is agreed, G7 and G20 countries must move beyond this global minimum and unilaterally commit to introducing a much higher minimum at 21% or above.”

If the G7 countries were to commit to a 21% or even a 25% rate then this would set a defacto minimum even though the legal minimum would be lower.

PSI also noted that the distribution of the extra revenue is yet to be finalised and must be fair to all countries. The current proposal favours countries where large multinationals are headquartered as opposed to where sales and work takes place. PSI has a long-standing position to support a fairer distribution of corporate tax revenue to countries in the global south and is concerned that without the details the current proposal may reinforce this injustice. Further, by keeping the rate low it decreases the chances of a shift in allocation as there is less revenue to go around.

In the lead up to the G20 in October, PSI and the wider union movement will be pushing government leaders to raise the minimum rate, commit to match Bidens 21% unilateral rate and ensure a fair distribution of the revenue so that we can end tax havens and all countries can rebuild their public services.

PSI will be leading global efforts to improve the proposal before it is discussed at the G20. If your union would like to be involved, please email Daniel.bertossa@world-psi.org

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