Finance ministers’ agreement on a fairer global tax system for multinationals is a step in the right direction. But there is a long way to go
Last week the Guardian reported that an Irish subsidiary of the US tech giant Microsoft paid no corporation tax at all last year, on profits of $315bn (£222bn). This is because Microsoft Round Island One, which collects licence fees for Microsoft software, is “resident” for tax purposes in Bermuda. Since Bermuda does not levy corporation tax, the only payout came in the form of bumper dividends for Microsoft shareholders, worth a total of $55bn.
Over recent decades, such shameless chicanery has become the way of the world. But at the weekend, G7 finance ministers took a first step towards dismantling this footloose, beggar-thy-neighbour version of capitalism, which has deprived treasuries of hundreds of billions of pounds in tax receipts. International corporate tax rules were designed a hundred years ago, to protect multinational companies from predatory governments and the threat of double taxation. But since the late 20th century, and particularly in the digital era, the power relationship has been inverted. In the age of high globalisation, multinational giants played pick and mix with tax jurisdictions, salted away profits offshore through baroque ownership structures, and used their power to play countries off against each other.
