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Governments are told that public services must shrink because money is tight. Yet a new Tax Justice Network report says that countries could capture an extra $500bn a year without raising corporate tax rates. The answer is to tax multinational profits where real economic activity happens – known as unitary taxation. No new profit is created. Revenue simply shifts from tax havens where profits are “booked” to the countries where workers produce and customers spend.
Making that principle a global tax standard depends on UN talks opening in New York on Monday. Modelled on the UN climate regime, a fiscal framework convention would create the governing body and procedures, with protocols providing detailed rules. The UN wants agreement by late 2027. Donald Trump’s US walked out last year and urged others to follow. None did.
Rich countries gain most when firms pay tax where people work, not where profits vanish in havens, because their economies are the largest. Britain would collect about £13bn extra a year in tax receipts – two‑thirds of the cost of an NHS-style social care system. EU governments could raise enough to quadruple climate-adaptation spending. Poorer countries also benefit. The report calculates that the global south would receive $156bn in one year – more than the International Monetary Fund has outstanding in loans to those nations.
For the first time in decades, multinationals could be taxed where they actually do business. Rules built for the corporate world of the 1920s – when national industrial giants dominated – would finally confront today’s companies organised around intangible assets and global supply chains, as well as profits of an altogether different scale. In 1929, General Motors made the equivalent of $4.7bn. Apple’s profit last year was $112bn. What the report calls “diversified” tax havens such as Switzerland and the Netherlands could offset losses by raising rates. Pure booking centres such as the Cayman Islands could not.
The talks suggest states are beginning to reclaim powers surrendered under globalisation to corporate lawyers and private tribunals. One protocol would let countries tax digital and other cross-border services without waiting for firms to establish domestic offices, blunting Mr Trump’s trade threats. A second could go further, shifting tax disputes from secretive investor-state arbitration into a more open, publicly accountable UN-led system.
The direction is unmistakable. Ireland, which is facing an estimated $11bn annual tax loss, has already begun putting aside part of its “windfall corporate tax receipts” in a new fund – an admission that the revenue won’t last. India and Nigeria have legislated so that companies profiting from their economies should not escape the tax net just because they operate across borders.
Britain has belatedly backed a UN-led shift towards taxing real activity. Defending rules entwined with its offshore network was politically indefensible and economically perverse. The US can sit out the negotiations, but it cannot shield American companies from others’ rules. The success of these talks has largely been down to African nations insisting on consensus where possible and majority rule where necessary. That denies the US and any rich-country bloc an effective veto. Backed by India, Brazil and other developing powers, an African-led coalition can now press a simple claim: countries should be free to tax value created within their economies. Britain should help them prevail.
