Meddling, imposing and unaccountable. Not the European Union, but the G7 headed by President Biden.
On Friday, world leaders will convene in Cornwall for the G7 summit to discuss, among other things, global health, the environment and trade. For Biden, it’s an opportunity to convey that the US is back on the world stage as a leader, not an agitator.
While the summit is taking place on home turf, the agenda has been set by the US President, at least when it comes to economic policy. With the UK holding the presidency of this G7 summit, we are supposed to determine the major priorities that will shape the discussions, yet the White House appears to be doing that for us.
Biden has already talked G7 nations round to his flagship policy of a global minimum corporation tax, which will force all member states to tax profits on big corporations at a minimum rate of 15 per cent.
The UK government held out against the originally proposed 21 per cent rate, but since then the French have already pushed to raise it. It may be that 15 per cent is just a starting point in a long negotiation to raise global rates of taxation.
It’s clear our government remains sceptical of Biden’s proposals; Rishi Sunak is reportedly pushing to exclude the City of London from the G7’s new global tax system to protect our most profitable companies in the financial services sector. If the UK government is so averse to the new tax regime, why have we signed up to the agreement in principle?
It is likely that a minimum tax rate among the world’s largest economies will stifle tax competition and raise costs, which will ultimately be passed onto the consumer. In attempting to fix tax rates the G7 is acting in much the same way as an illegal cartel.
If a blanket minimum rate is enforced across the board, nations which currently have low rates of corporation tax, like Ireland, would instantly lose their competitive edge, while countries that want to attract investment in this way will be less able to do so.
This agreement takes the power to decide a policy as important as taxation away from national parliaments and hands it to a coven of global leaders, away from the scrutiny and accountability of national democracy.
The deal also effectively means that digital service taxes (DST ) operated by the UK and other nations will be repealed. Yes, digital service taxes unfairly target US firms like Facebook, Amazon and Google, but the decision should have been made by elected politicians in the House of Commons, not Department of the Treasury officials in Washington.
Biden’s interference is unlikely to stop there. The Times has reported that he will take the opportunity to warn Boris Johnson not to renege on the Northern Ireland Brexit deal. It is hard to imagine the British Prime Minister welcoming a lecture on the peace process in Ireland from a supposedly close ally.
Cooperation between nations is, of course, vital, especially when it comes to coordinating a global environment strategy. Boris Johnson will use the UK’s presidency of the G7 to do just that, laying the foundations for an agreement or treaty at the COP 26 climate change summit in Glasgow in November.
Discussion of an environmental Marshall plan at the G7, initiated by Boris Johnson, which would see taxpayers’ money redistributed to developing nations to support large-scale renewable energy projects across Africa and parts of Asia and South America, might be popular in some circles but is unlikely to be a vote winner among some former “Red Wall” seats. Voters there may question the cost of such a plan – and reasonably prefer for their money to be spent on domestic priorities. After all, Brexit voting northern seats are more likely to support a cut in foreign aid spending, so why would they swallow this pill?
The G7 plan to fix global minimum corporation tax rates should concern anyone who values national sovereignty. The UK didn’t vote to take back control from the European Union only to hand over power to decide our fiscal policy to other nations in the G7.