A year ago the prospect of a global minimum tax on corporate profits was considered a fantasy. Donald Trump was in the White House and the word cooperation was not in his vocabulary. In just under a fortnight, the G7 will meet in Cornwall and the words co-ordination and cooperation are set to be heard frequently.
The UK says it is pushing hard for a tax deal that would prevent the big tech companies from playing countries off against each other and squirrelling their profits away in low-tax havens.
Joe Biden’s administration is urgently seeking a robust agreement that will see most of the 139 countries lined up by the Organisation for Economic Cooperation and Development (OECD) signing a global pact.
In the first instance, Rishi Sunak’s team in the Treasury needs to drop its narrow and self-interested focus on the trade-offs that could leave the UK out of pocket.
There is a deep-seated fear in Whitehall that a fair global tax system would leave the UK at a disadvantage, because along with the Dutch, the Swiss and the residents of Luxembourg and Liechtenstein, Britain has spent centuries milking the international flow of funds as they pass from legitimate businesses through the hands of lawyers and accountants in London and on to low-tax jurisdictions in the Isle of Man, ジャージー, Bermuda and the Cayman Islands.
When the UK was still an EU member, British ministers – and their Dutch counterparts – regularly blocked moves by member states to set minimum taxes that would have had the effect of placing a charge on funds before a transfer offshore could be made.
According to analysis of London’s beating financial heart, the City is still the centre of a global money-go-round that helps the rich – and, increasingly, many middle-class people with pensions and trusts of varying kinds – to cut their tax bills.
An assessment by the independent Tax Justice Network found that 35 mostly richer countries – those that are members of the OECD, 英国を含む, オーストラリア, the US and the major European economies – are responsible for 39% of the world’s corporate tax abuse risks, while their dependencies are responsible for 29%. This shows how far we need to go to reform the financial system.
OECD officials are making genuine efforts to strike a deal that will benefit those beyond its membership, but the negotiations are getting more complex every day.
There are two pillars holding up the OECD programme, endorsed by the G20. The first is focused on how profits are allocated to each nation, while the second sets a global minimum tax.
Biden is now in a hurry and wants a comprehensive deal drawn up at the G7 in a fortnight, and agreed by the OECD in June and the G20 in July. Then he can take it to Congress and possibly secure ratification before the 2022 midterm elections.
To this end Biden has dropped his minimum tax rate call from 21% に 15%, knowing that Ireland and the UK, とりわけ, will not agree to anything higher.
It may seem strange to mention the UK alongside Ireland: the latter has long had a 12.5% corporate tax rate, while the UK’s 19% rate is due to rise to 25% に 2023.
To some extent the pandemic and a backlash against austerity have changed minds in Sunak’s Great George Street offices. Officials know that a global tax of some kind is likely and it won’t be a good look to be seen blocking a deal. But Sunak wants the freedom to cut corporate taxes in the future, just as he did at the March budget when he offered the super-deduction tax relief on investment – a subsidy greater than many large firms’ tax bills.
For this reason the details at the heart of a global tax are important to the UK. The tragedy would be if the UK were among the countries to scupper a deal – one that will help many countries in the developing world benefit from higher tax receipts – in order to preserve a Tory tax-cutting agenda at home.
If Big Oil believes that trouble only comes in threes, it may be sorely disappointed.
The global industry was left stunned by the triple body blow meted out by disgruntled activists and shareholders in a single brutal day for Shell, ExxonMobil and Chevron last week.
First a court in the Hague found in favour of green group Milieudefensie (地球の友オランダ) and ordered Royal Dutch Shell to cut its carbon emissions by 45% by the end of the decade. Within hours, shareholders in US giant Chevron voted in favour of plans put forward by Dutch climate activists Follow This to cut its emissions too.
最後に, after a shambolic annual shareholder meeting, the US’s Exxon confirmed that a hedge fund set up less than six months ago had ousted two of its board members.
But this extraordinary convergence of climate activists and institutional investors is something oil bosses should start getting used to. The once-unusual bedfellows have more in common today than ever before, and their combined might holds the promise of a tipping point in the battle to bring climate laggards to heel.
At the heart of their shared interests is risk. Climate activists have been stressing for decades that the overheating of the planet is the single biggest threat facing humanity today.
The world’s biggest wealth managers now appear to have taken on board the idea that even the world’s biggest companies are not too big to fail if they refuse to adapt to a changing world. Credit rating agency Moody’s agrees. It has already warned in the wake of Big Oil’s Black Wednesday that the credit risk of major oil producers is on the rise.
Oil companies that aren’t ready to jump will find that investors stand ready with activists to push. They should expect more trouble ahead.
The car industry is still in the grip of pandemic disruption caused by computer-chip shortages and continued restrictions. Yet thoughts are turning – after a long interlude – back to the sector’s greater challenge: the shift from fossil fuel engines towards less polluting electric cars.
On that front, last week provided heartening news for the UK, with Japanese carmaker Nissan in talks with the government over building a battery “gigafactory” beside its Sunderland car plant. If the talks succeed, it will be a boon for Sunderland and the broader industry, securing car manufacturing, new jobs and work for the supply chain on these shores.
Nissan’s investment decisions in Sunderland will have been aided by the clarity offered by the Brexit deal. The hurried treaty offered carmakers stick and carrot: tariffs if they do not use enough UK or EU content, but a three-year grace period to get batteries from abroad.
The briefness of that window underlines the urgency of the situation for the rest of the industry. The future prospects of UK car plants run by Vauxhall owner Stellantis, Tata-owned Jaguar Land Rover, and Toyota will start to look tricky without a UK battery supplier.
Yet so far there is little sign of enough UK battery supply to sustain an industry at its current size. ザ・ startup Britishvolt plans to build a factory, but does not yet have full funding, while authorities in Coventry are seeking planning permission in the hope of attracting an investor. その間, the rest of Europe has 21 lithium-ion battery factories in the pipeline, による Benchmark Minerals. China has 148 to be built or expanded.
The car industry knows the challenge: the state-funded Faraday Institution has said より多い 100,000 UK jobs are at risk without at least 10 large battery plants on the scale envisaged by Nissan. A Nissan gigafactory needs to be a trailblazer for the UK car industry’s new electric era – not its sole champion.