The international tax system was recently shaken by two new tremors. Ángel Gurría, the secretary-general of the OECD, the club of rich nations that oversees these global rules, told Britain to “hold fire” on its plan to tax big tech firms such as Google, Facebook and Apple at 2% of UK revenues. The US responded by threatening to hike tariffs on UK car exports, but Britain’s chancellor, Sajid Javid, insists the tax will still go ahead from April. France’s president, Emmanuel Macron, also agreed to delay (but not discard) a similar tax in exchange for the US’s agreement not to place tariffs on French exports. The vast tectonic plates of international taxation are finally beginning to shift.

Without a coordinated, global agreement on new tax rules, Gurría argues, the result of all these measures will be a “cacophony and a mess”. A new trade war could ensue. But there’s another side to this story – one just as important, but less well understood.

In 2019 the central principles that have organised the international tax system for the last century began to publicly unravel. A long OECD consultation aimed at finding ways to patch up the leaky global rules ended with experts agreeing that a completely new set of ideas was needed to govern the digital economy.

Until last year the OECD, influenced by multinationals, treated proposals for unitary tax as one might treat a rabid dog

The tension at the heart of it all is this: when a multinational from one country invests or sells in another, which nation taxes its profits? The old rules are supposed to give each nation a fair bite of global profits by treating each subsidiary of a multinational company as a separate entity, and allowing the host nation to tax it. UK subsidiaries of McDonald’s, say, should pay UK tax.

The trouble, as we all now know, is that large companies, helped by large accounting firms, game this system by artificially sucking their profits into tax havens, where they pay little or no tax. Tax Watch UK, an investigative group, estimated recently that five big tech firms – Apple, Google, Facebook, Cisco and Microsoft – made an estimated £30bn in profit from UK customers from 2012 to 2017, but shifted most of these profits offshore for tax purposes, paying just £933m in UK tax between them: a rate of about 3%.

The OECD rules do have some teeth: they help the UK tax its own multinational companies (such as BP and Lloyds) with greater ease (though it has a harder time taxing foreign firms such as Facebook or Netflix). If foreign companies paid tax at the rates of their UK counterparts, the UK might earn an estimated £25bn more per year. Meanwhile, the French treasury reckons that digital giants pay a tax rate that is 14 percentage points lower than the small and medium enterprises that tech giants are strangling in the marketplace. These profit-shifting shenanigans cost the US an estimated $100bn a year, while the IMF and Tax Justice Network estimate they inflict $500-600bn in global tax losses annually, of which poorer countries lose $200bn, far more than the $150bn global aid budget.

The old rules are skewed in favour of rich countries, too, in large part because they help the multinationals’ home countries get the biggest share of tax from global profits. This system reflects “a colonial pattern, refined for the 21st century”, according to Jayati Ghosh, a prominent Indian economist. The profit-shifting, she adds, “has now become so large, so obscene”.

There is a fundamentally different way to tax multinationals that could cut tax havens out of the picture. Called unitary tax, this divides a multinational’s total global profits among each country where it operates, using a formula based on real economic substance: the number of employees and the size of sales, turnover and physical assets in each place. Each country may then tax its portion at whatever rate it likes. So if a multinational has a one-person booking office in Bermuda, the formula would allocate only a small share of the pot to that particular subsidiary. Unitary tax has complications – not least because there are many ways to set the formula– but it is the only rational basis for modern global corporate tax.

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Until last year the OECD, influenced heavily by multinational businesses, treated proposals for unitary tax as one might treat a rabid dog: with fury, contempt and fear. But it produced a consultation document in 2019 that for the first time embraced unitary tax as a potential solution. The then IMF boss Christine Lagarde weighed in, calling the old tax rules “outdated” and “especially harmful to low-income countries”. The Trump administration could have rejected the proposals that would see US multinationals pay more than they currently do – but it hasn’t. A Pandora’s box has been opened, and this is a good thing.

The OECD’s latest proposals to reform the tax system around the digital economy change little: they still treat the “routine” profits from digital activities under the leaky old system, whereas only “residual” or excess profits – maybe a fifth of the pot, if we’re lucky – would get a unitary treatment. The OECD wants a broad international agreement by the end of this year. But already the UK, France, Austria, Spain and Italy are considering or implementing their own tech taxes, and more countries will likely do so, adding to the “cacophony” that threatens the cosy consensus of multinationals and the OECD.

As century-old certainties crumble, Britain must face down US threats and show solidarity with Europe. It should also push to adopt a broad unitary tax system until a decent global scheme is ready.

In rich and poor nations alike, millions are seething that the system, riddled with tax havens, is rigged against them. To avoid the pitchforks, leaders must now stand up to multinationals. The good news is that this time something useful might just emerge from the cacophony.

• Nicholas Shaxson is the author of The Finance Curse: How Global Finance is Making us All Poorer