Let me get the good news on the G7 tax plan on the record. It is historic, it's a step in the right direction and it definitely is going to upset a lot of tax havens and some companies. So let's mark that up as a plus for tax justice. But then....a short thread
The 15% minimum tax rate is far too low: it should have been at least 21% and maybe more. The OECD average tax rate is around 25% and so this is a big concession to the low tax countries, including the UK and its tax havens
Next, there are many accounting problems in what has been announced. Who is defining profit margins? Is it one year or over time for example? And why 10%? That brings some pharmaceuticals in but leaves Amazon out. Is that what was intended?
And who defines what is tax paid? If that is an accounting issue then I sincerely hope deferred tax is ignored. If it is a current tax issue then my research shows most companies overstate tax due in their accounts and actually pay less. So which figure to use?
And come to that, where are sales? Are they where things are shipped from, or too? It's likely to be the destination, but that biases this whole deal to developed countries like the G7 where most consumption takes place. Is that fair?
And there are real problems with current Organisation for Economic Cooperation and Development country-by-country accounting: are these going to be ironed out to stop gaming on this issue because that will be essential?
And how will the intense lobbying from the tax havens be managed?
And how will data on where sales are to be collected? Can we rely on companies to not manipulate that?
I welcome this deal, although not the rates, but what I really see coming the way of tax negotiators are a pile of accounting problems that almost none of them have ever had to deal with before. I am just hoping they are up to dealing with them. It's essential they do
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