Anna Birley Policy Officer 10th June 2021 Blog Economy Share Tweet Ahead of the G7 meeting in Cornwall this week and after weeks of prevarication and silence, Rishi Sunak has finally committed the UK to some global tax reforms. Co-operative Party members and supporters should be proud of the role you played in making that happen – thousands of you co-signed our fair tax letter to the Chancellor alongside Anneliese Dodds and Rachel Reeves, helping to pile on the pressure to act. That pressure was growing internationally too. For weeks, this Government sat back while other finance ministers in countries like Germany and France followed President Biden’s lead. We were the only country not to back President Biden’s plans, leading to the inevitable question: was Rishi Sunak on the side of world leaders and the British public who want to end tax avoidance, or was he on the side of tax dodgers? However, what appears to be a campaign win for fair tax campaigners is actually not as straightforward as that. Yes, the agreement is a big deal and major step forward. But it is not big enough, and critical parts have been watered down. The communique from finance ministers on the agreement suggests that the deal only applies to profit exceeding 10%, which may mean massive companies like Amazon could continue to game the system and not pay their fair share. The Government is also already seeking loopholes for their friends in the finance sector before the ink of the agreement is dry. The 10% profits threshold is a blunt tool that will miss many multinational tech giants by virtue of the variety of different business models for different companies. Amazon, for example, reports a 6.3% profit margin – compared to Amazon’s AWS subsidiary which made a margin of 30%. Amazon deliberately runs its online retail business at lower profit margins in order to gain market share, meaning we could end up rewarding a structure that already puts our high street shops at an unfair advantage. This loophole makes the proposed new rules very easy to game. It is possible, for example, that some businesses will look to rejig their operations to offset profits against loss-making units to remain under the 10% threshold, unless tough enough rules are put in place. Another feature that has been watered down from Biden’s plans is the global minimum corporation tax rate. Instead of Biden’s ambitious 21% proposal, G7 ministers have committed to a minimum rate of 15%. But we should still regard this as a turning point. The phrasing says “at least” 15% which leaves it open to be negotiated higher. At the Co-operative Party, we are passionate about fair taxes and, with your help, have long campaigned to end tax havens, ensure all business pay their fair share, and to implement a global system of country-by-country reporting. This agreement is a massive step forward, but there is more work to do – join our campaign to keep up the pressure on the UK’s Government to be more ambitious, to increase the global minimum rate, and to remove the loopholes so all companies pay their fair share.