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THE G7’s support for a global minimum corporation tax marks a strategic shift by the United States.
The emergence of immensely profitable big tech companies has changed the corporate landscape. By late last year the “big five” such firms — Apple, Microsoft, Amazon, Google and Facebook — made up a fifth of the value of the Standard & Poor index of the largest 500 corporations in the US.
The lack of accountability of these gigantic firms has become a thorny issue across much of the planet.
And they have expertly manipulated differential tax rates in order to minimise their obligations in the countries where they do most business: the OECD has estimated that the value of tax avoided could amount to a tenth of global tax revenues.
Attempts to deal with this have long run into US hostility. Last year it warned the British government that a planned digital services tax would discriminate against US commerce and prompt retaliatory action.
The Joe Biden administration’s about-turn is connected to a domestic agenda that abandons much of the neoliberal policy package followed since the 1980s. The Biden White House is pushing for huge public investment in science, technology and infrastructure.
Its motives are mixed. Biden’s own speeches show nervousness of China’s advance is a prominent factor: the cumulative impact of China’s state-led development in fields the US was not previously interested in (such as high-speed rail) combines with the decline in public investment by Western countries over decades to give China a growing competitive advantage.
Biden has told senators that China is going to “eat our lunch” if the US doesn’t begin to adopt a more strategic approach to its own economic development.
Yet sustained public investment is not possible unless companies are made to pay their taxes.
At the same time, top Democrats may well hope that pushing back against the long-term trend of real-terms wage losses will address the collapse in political legitimacy that is evident in the United States and many of its allies, including Britain.
Episodes like Trump’s supporters’ reaction to Biden’s election, or the Remain camp’s attitude to the Brexit vote over here, show a destabilising polarisation in which millions of citizens do not accept the legitimacy of political opponents.
This is not a secure base from which to engage in the “extreme competition” Biden foresees taking place between the US and China.
More worryingly still, it has shown the capacity to feed real radicalisation and opposition to the capitalist system itself in the forms of the Bernie Sanders and Jeremy Corbyn movements.
If these calculations underlie the US shift on corporation tax, they do not make it unwelcome.
A global minimum corporation tax rate would help combat tax avoidance and support higher public spending.
Yet the rate agreed on is too low to make much of a difference — and in Britain we should be aware that our own government played a leading role in whittling it down.
As with the vaccine patent waiver, which Britain and the EU continue to resist, our government is clinging to ultra-reactionary neoliberal nostrums despite the shifts across the Atlantic.
Even the rate agreed will not on its own bring into line tax havens that are not formally part of the UK but are protected by their status as subjects of the British crown, such as Jersey and Guernsey.
The changing international situation provides an opportunity for the left to increase pressure for an end to such loopholes and significant rises in corporation tax in this country.
But the US rivalry with China driving these shifts is exceptionally dangerous. Higher spending on armaments and military showboating is no route to socialism.
Exploiting ruling-class differences over taxation and finance to advance public ownership and investment must not lead to alignment with ever more aggressive foreign policies aimed at shoring up US global dominance.
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