The G7 tax deal is all about American geo-economics

June 16, 2021

The G7 tax deal is all about American geo-economics

Alexander van Wijnen
June 16, 2021

The G7 tax deal is all about American geo-economics

Alexander van Wijnen
June 16, 2021
United States Capitol. Photo courtesy of Harold Mendoza. © Unsplash.

The G7 tax deal is all about American geo-economics

June 16, 2021

The G7 reached a historic agreement for a global corporate tax rate of a minimum of 15% in which corporations must also pay taxes in nations where they sell (and not just where they’re headquartered). If we take the deal at face value, it seems that power is shifting from corporations to states. After all, since the 1980s, the global corporate tax rate had been dropping from 50% to 24%, as developing countries built growth models by attracting foreign investors with lower taxes and some developed countries also took part in the ‘race to the bottom’ (e.g. Ireland, the Netherlands, Singapore). However, behind the deal of the G7, more forces are at play. Although it is a multilateral deal, hailed by many as the return of responsible U.S. leadership, it is primarily the U.S. that will benefit. First, it is expected that the biggest share of taxes will be paid by U.S. big tech companies to the U.S. itself. Second, in exchange for its concessions in the deal, the U.S. has demanded the removal of the Digital Services Taxes of European countries. It shows that American multilateralism is still a ‘geo-economic’ instrument to wield power across the globe.

Burning questions:
  • How will the EU adjust to U.S. demands to drop digital services taxes?
  • Will there be a G20 tax deal in July?
About the author(s)
At sister company Dasym, Alexander has been assigned a variety of tasks, for his interests transcend branches of knowledge as well as geographical boundaries. In brief, he writes policy papers, interprets and elucidates global developments, and conducts thematic investment research. His academic background spans public administration, history of international relations, and philosophy, having published dissertations on smart cities, Ethiopian sovereignty and independence, and Chinese philosophy towards technology. Integral to his responsibilities, Alexander wades through the latest literature on geopolitics, technology, financial markets and cultural anthropology.
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