A global corporation tax is a terrible mistake

International cooperation is alive and well – at least when it comes to raising taxes. One hundred and thirty six countries have now signed up to a global minimum corporation tax of 15 per cent, proposed by G7 countries in June and pushed heavily by the UK Treasury. This is another step forward for what is thought to be the biggest overhaul to the international tax system in a century.

The installation of a corporate tax floor is part of a comprehensive effort to reform how multinational companies are taxed: that is, to more precisely target where profits are being made (instead of where products are being created). ​​Firms with a profit margin of over 10 per cent, which applies to roughly 100 multinational companies, will see 20 per cent of their profits above that margin diverted to the tax jurisdictions where they are operating. This it is estimated will reallocate $120 billion worth of profits once the new system comes in.