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The G-7’s Reckless Commitment To Mounting Debt

The G-7’s Reckless Commitment To Mounting Debt

Historically, meetings of the largest economies in the world have been essential to reach essential agreements that would incentivise prosperity and growth. This was not the case this time. The G7 meeting agreements were light on detailed economic decisions, except on the most damaging of them all. A minimum global corporate tax. Why not an agreement on a maximum global public spending?

Imposing a minimum global corporate tax of 15% without addressing all other taxes that governments impose before a business reaches a net profit is dangerous. Why would there be a minimum global corporate tax when subsidies are different, some countries have different or no VAT rates (value added tax), and the endless list of indirect taxes is completely different?  The G7 “commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises”. This entire sentence makes no sense, opens the door to double taxation and penalizes the most competitive and profitable companies while it has no impact on the dinosaur loss-making or poor-margin conglomerates that most governments call “strategic sectors”.

The global minimum corporate tax is also a protectionist and extractive measure. The rich nations will see little negative impact from this, as they already have their governments surrounded by large multinationals that will not suffer a massive taxation blow because subsidies and tax incentives before net income are large and generous. According to PWC’s Paying Taxes 2020 (https://www.pwc.com/gx/en/paying-taxes/pdf/pwc-paying-taxes-2020.pdf), profit taxes in North America already stand at 18.5% but, more worryingly, total tax contributions including labour and other taxes reach 40% of revenues. In the EU & EFTA profit taxes may be somewhat smaller than in North America, but total taxation remains above 39% of revenues.

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