The hidden costs of the G7 tax deal

Calls to reform corporation tax are nothing new and don’t just come from the left. The inefficient and bureaucratic nature of the tax has been highlighted by free-market advocates for years, as it becomes increasingly obvious that, in the age of multinationals and digital tech giants, the structure is no longer fit for purpose.

Action is now being taken. This afternoon the advanced economies which form the G7 agreed a new structure for taxing big corporations. The historic deal will see a major shift in the way companies are taxed: away from the existing model in which they are taxed in accordance with where their product is created to a new system based on where they are operating. Firms with a profit margin of 10 per cent or above – which is currently thought to apply to roughly 100 companies, including Google and Amazon – will now have 20 per cent of their profits above that margin reassigned and taxed in the countries where they are doing business.