Charlotte Street Partners



The mirage of multilateralism

Written by Javier Maquieira, senior associate 
Edited by Tom Gillingham, associate partner
8 June 2021

Good morning,

Saturday was a historic day for multilateralism. Not so much as a proper comeback of the approach, but as a welcome sign that perhaps not all is lost when it comes to pursuing a common goal in international affairs.
I’m of course referring to the agreement reached by the G7 group of wealthy nations to tackle tax abuses by multinationals and the world’s biggest tech companies.
Pending formal approval from a wider set of countries, the agreed reforms would consist of two pillars: a mechanism enabling countries to tax some of the profits made by big corporations based on the revenue they generate in that country, and a minimum global corporation tax rate of 15%, which is lower than President Biden’s initial proposal of 21%.
While the first pillar, which would confer countries new taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable firms, could affect around 100 companies, the global corporation tax rate is expected to capture up to about 8,000 multinationals.
In theory, Amazon would fall outside the first element of the reform, since the US tech giant’s profit margin in 2020 was only 6.3%. However, finance ministers are reportedly planning to treat Amazon’s cloud-computing division, Amazon Web Services (AWS), as a separate entity. Unlike the company’s retail business, AWS generated a healthy operating margin of 30% in 2020, meaning it would be caught by the profit margin threshold.
In the UK, the chancellor of the exchequer, Rishi Sunak, welcomed the deal as a “huge prize for British taxpayers”. Although Britain is home to few global giants, it has a large consumer market and will hope to raise more money via the first pillar, getting the likes of Google and Facebook to pay more of their global tax on profits to HMRC.
Not everyone is happy with the minimum tax deal, however. Tax justice campaigners have deemed it “far too low” to make a difference, with aid charity Oxfam saying it would not stop tax havens from operating as it is “similar to the soft rates charged by … Ireland, Switzerland and Singapore”. Big corporations, on the other hand, have remained modestly supportive of the agreement.
Be that as it may, getting countries to compromise on international tax reform is never an easy task. And even less so against the current fragmented geopolitical backdrop, which makes it difficult to ascertain whether Joe Biden’s leadership or a coincidence of self-interests should be credited for this mirage of multilateralism.
One thing is certain: how much the accord manages to achieve will depend on the fine print of negotiations between the OECD and G20 countries in the months and possibly years to come.


The UK health secretary has announced that people aged between 25 and 29 will be able to book their Covid-19 vaccination in England from today. In a statement to MPs in the House of Commons yesterday, Matt Hancock also said it was ”still too early” to say whether the UK government would press ahead with step four on England’s roadmap out of lockdown on 21 June.
The speaker of the House of Commons has ruled the amendment tabled by rebel Conservative MPs to reverse foreign aid cuts is out of scope of the bill. Sir Lindsay Hoyle has, however, accepted a request for an emergency debate on the issue – due to take place today – to test the will of MPs, and said he expected the government to bring forward a vote on the decision to make the cut.
The European Commission is expected to table at least eight concessions on the Northern Ireland protocol to avoid a confrontation that could threaten peace and British relations with Europe. The European Union’s lead negotiator, Maros Sefcovic, is also expected to tell the UK Brexit negotiator, Lord Frost, that in return for a compromise, the UK government must implement the protocol “in good faith” or else face trade sanctions. (£)

Business and economy

The US Food and Drug Administration (FDA) has approved the first new treatment for Alzheimer’s disease since 2003. Biogen’s Aducanumab, which will now be subject to a large, confirmatory trial to determine whether it has a clinical benefit, is an intravenous infusion aimed at slowing down the progression of the disease by breaking up clumps of amyloid plaques that form in the brain. (£)
The Bank of England has warned that widespread adoption of stablecoins could risk financial instability and the wider economy by leading to a flood of withdrawals from traditional banks. The Bank, which is exploring whether to launch its own digital currency, ‘Britcoin’, also said that this new form of digital asset would need to be regulated in the same way as bank payments if they became widely available.
Industry bodies have warned the UK government that hospitality, retail, and leisure companies are facing high levels of debt, including £2.5bn of rent debt and another £6bn worth of government debt accrued through Covid-19 loans. Concern has also been expressed about the uncertainty around the final date for lifting coronavirus restrictions.

Columns of note

Judith Evans writes in The Times that despite a surge in sales of products marketed as being environmentally friendly, a majority of consumers have not so far fully embraced buying green. To achieve widespread change, Evans argues, marketers will need to ensure new habits move beyond fad territory and are cultivated across the board. This includes the need to demonstrate ethical behaviour on wages and taxes if big companies want their green messages taken seriously. (£)
Writing in The Guardian, Gaby Hinsliff argues that by prioritising the vaccination of 12-year-olds, who are at a significantly smaller risk of serious illness, over offering vaccine doses to countries in need, the UK and other western countries would be choosing not to save lives overseas and paradoxically jeopardise lives here, too.

Cartoon source: The Times


What happened yesterday?

London stocks closed higher on Monday off the back of a strong day for the housebuilding sector. The FTSE 100 ended the session up 0.12% at 7,077.22, while sterling was 0.16% stronger against the dollar at $1.42, but weaker versus the euro by 0.15% at €1.16.
Across the Atlantic, Wall Street equities were mixed ahead of US inflation data later in the week, with the S&P 500 closing lower by 0.1% and the technology-focused Nasdaq Composite index edging up 0.5%.
In company news:
Royal Mail was up 1.42% following reports the postal service company will offer timed delivery slots next year as it looks to compete with Amazon.
Reckitt Benckiser edged 0.72% lower as the consumer goods group agreed to sell its baby formula business in China to the private equity firm Primavera for $2.2bn.
IWG plunged 10.26% after the workspace provider warned that underlying earnings for 2021 were set to be “well below” the previous year’s level because of the impact of Covid-related restrictions on some of its markets.

What’s happening today?

B.p Marsh
Card Factory
Intermediate Capital
Tinybuild Inc S

Advanced Medical Solutions Group
Dp Eurasia
Honeycomb Inv.
Pharos Energy
Phoenix Spree D
Ra Internation.
Rm Secured
Trident Royal.
Trufin Plc
Xpediator Plc

UK economic announcements
(00:01) Retail Sales

Int. economic announcements
(07:00) Industrial Production (GER)
(10:00) ZEW Survey (GER) – Current Situation
(10:00) ZEW Survey (GER) – Economic Sentiment
(10:00) Gross Domestic Product (EU)
(10:00) ZEW Survey (EU) – Economic Sentiment

Source: Financial Times

did you know

Scholars in the Middle Ages popped the ‘b’ into the word ‘debt’ because of its Latin origins (debitum), despite that fact that it came to English from the French word dette and was never pronounced. The same applies to ‘doubt’, ‘plumber’, ‘subtle’, ‘indict’, and ‘island’. (source: @qikipedia)

Parliamentary highlights

House of Commons

Oral questions
Health and Social Care (including Topical Questions)
Compensation (London Capital & Finance PLC and Fraud Compensation Fund) Bill: Second Reading
Motion Relating to the appointment of external members to The House of Commons
Motion relating to the membership of The Parliamentary Works Estimates Commission
Motion relating to the membership of the Speaker’s Committee for The Independent Parliamentary Standards Authority
Redevelopment of Kettering General Hospital

House of Lords 

Oral questions
Guidance to frontline staff on how to treat vulnerable disability benefit claimants
Impact of the document ‘Aligning UK international support for the clean energy transition guidance’ on international fossil fuel investment
Role destination management organisations can have supporting the recovery of the visitor economy from the impact of COVID-19
Orders and regulations
Town and Country Planning (General Permitted Development etc.) (England) (Amendment) Order 2021 – motion to annul and motion to regret
Finance Bill – second reading and remaining stages
Economic Affairs Committee report ‘New powers for HMRC: fair and proportionate?’

Scottish parliament 

Parliamentary Bureau Motions
First Minister’s Statement: COVID-19 Update
Scottish Government Debate
Tackling Poverty and Building a Fairer Country
Committee Announcements
Members’ Business
Jim Fairlie: Impact on Scottish Agriculture of Tariff-free Trade Deals

Share this post