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.