You always know you’re winning the argument when the opposition resort to name-calling. In this sense, I was somewhat pleased to see the Telegraph describe the Biden tax plan as a ‘nefarious far-left agenda’. If we have reached a stage where bringing an end to global tax dodging can be described as nefarious then victory might just be around the corner.

The background to this debate is that tax abuse by multinationals has been a thorn in the side of economic progress for decades. Indeed, there is good reason to think that the current system of offshore tax havenry has its roots in the desire of colonialists to stash their stolen assets away from the prying eye of the UK authorities. It is no accident that the zero tax rated network of islands—what some have called archipelago capitalism—was birthed by a nation mourning its loss of colonial power.

The consequence, however, is that globally up to $600 billion a year is not paid, that should be paid, in corporate income tax. We are all familiar with the tech giants that appear to escape their fiscal responsibilities in this way, but the Apples, Amazons, Facebooks, and Googles are not the only ones engaged in such activity. It’s also true of mining companies in Zambia, of drinks companies in Scotland, and of pharmaceutical manufacturers across the world.

Tax dodging is big business. And while in absolute terms, most of the missing funds fall on the wealthier economies, as a proportion of total government revenue, the loss is felt most by the world’s poorest countries. While high income countries lose approximately 3% of their total tax revenue each year, low income countries lose 9%.

Eventually the OECD realised something needed to be done about this, and so began the BEPS (Base Erosion and Profit Shifting) process as a way to try and find a global solution to multinational tax abuse. In October 2020, after much deliberation, the OECD finally issued a set of proposals for the world to consider.

The fundamental but perhaps unsurprising problem with them is that they favour high-income countries at the expense of the poorest. In particular, their starting position is that most corporate taxation is allocated appropriately, and that we only need to ensure that we tax fairly the ‘residual’ profits that seem to be escaping our clutches.

In response, tax justice organisations like my own began to make noise, decrying the proposed solution as unfair, unjust, and immoral – especially in regard to lower income countries. In the process, the OECD discussions seemed to be running into the sand, and then the President of the United States, Joe Biden, announced his ‘Made in America’ Tax Plan.

The most surprising feature of this plan was not the pages of technicalities which addressed how global profits should be distributed—since, to a large extent, these continued to favour the US at the expense of poorer countries—but the support for a 21% global minimum corporate tax rate.

It’s fair to say that while we expected a change in approach with the new US administration, such vocal support for a global minimum that high was not on the cards. Pillar Two of the BEPS negotiations had stipulated that a global minimum was needed, but the kinds of numbers being talked about were the 12.5% that is the current rate in Ireland. Few expected a figure as high as 21%.

The difference such a rate would make is significant. At a global level, the Tax Justice Network have estimated that if combined with the existing OECD proposals the world would recoup some £540 billion every single year. This is 27 times what is needed to vaccinate the whole world against Covid.

More to the point, it would send a signal to the multinationals that the era in which they can avoid their moral and financial responsibilities, at least in respect of tax, is over. Finally, they would be paying a share towards a global community that provides their skilled and healthy workforce, their security, their infrastructure, and their consumers. Without a state to ensure all these things, there would be no corporate success at all.

As I’ve suggested, however, neither the Biden plan nor the OECD plans are ideal. Both of them prioritise tax revenues in the countries where the business is located rather than the countries in which they actually do business. The outcome of this is that even with a 21% global minimum rate, the vast majority of the proceeds flow to the wealthier countries. Under the OECD proposal, for instance, the US would receive $166 billion of the $540 billion additional tax revenue.

In response, a number of alternative proposals have been made which could create a much fairer distribution of funds across the globe. The most prominent of these is the METR (Minimum Effective Tax Rate) proposal, which begins with the global consolidated profit of any multinational and then divides it more fairly around the world according to where the corporation has its activity.

Under this proposal, an extra $103 billion would be recovered each year, but crucially a much higher proportion of it would go to lower income countries. To take just one example, under the OECD proposal, India would gain $8 billion per year in contrast to $18 billion under the METR proposal. Consider the impact that extra $10 billion could have on vaccine distribution across the country.

All of this then begs the following question: why does the UK government appear not to support these ideas? In a debate on Monday night, the government used its majority to defeat a Labour amendment to the Finance Bill that would have committed it to exploring the Biden proposal in detail, in particular its impact on UK tax revenue.

The government claims that its resistance relates to a negotiating tactic focused on securing a better overall tax deal for the UK, but when you consider that a 21% global minimum rate is expected to generate around £13.5 billion for the UK economy, and the alternatives under consideration far less, this argument evaporates.

Others have argued that this is a matter of sovereignty: that in agreeing to a global minimum rate, we are somehow losing a notional power to set our own corporate tax rates. Of course, this argument is entirely undone by the fact that the current system enables multinationals to avoid paying the sovereign rates of tax we have already set. It is hard to see how there is a greater loss of sovereignty in signing up to a global agreement that you have negotiated than in businesses simply ignoring the existing legal requirements.

What one is left with is the fact that the UK, through the City of London, and its archipelago of Overseas Territories and Crown Dependencies, is in fact at the centre of the tax haven world. Too many of those in power benefit from this arrangement. Why would they give up an income stream that has proved so lucrative for decades? Until that changes, our victory is further away than we might have thought.