G7 tax repression and the end of hyper-globalization by Dani Rodrik

The G7 agreement on global business taxation still needs the formal approval of a wider set of countries, and many details remain to be worked out for it to be effective. However, it would not be a stretch to characterize the agreement as historic.

CAMBRIDGE – On June 5, the world’s major economies announced a deal that will strengthen their ability to raise taxes for global businesses. The deal still needs the formal approval of a wider set of countries, and many details remain to be worked out for it to be effective. Nonetheless, it would not be a stretch to characterize the agreement as historic.

The G7 agreement has two parts. First, it proposes an overall minimum tax of 15% on the largest companies. Second, a portion of the global profits of these companies will be recovered in the countries where they do business, regardless of the location of their physical headquarters.

These goals are such a clear indication that any of the rules of hyper-globalization – that countries must compete to offer global companies ever softer deals – are being rewritten. Until recently, it was US opposition that held back global tax harmonization. Now, by contrast, it was President Joe Biden’s administration that pushed the deal.

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Estelle D. Eden

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