This month, the Group of Seven nations agreed to President Biden’s proposal for taxing multinational corporations. The plan asks nations to agree to a corporate tax rate of at least 15 percent, which would lower the incentive for companies to shift their profits to offshore havens. As part of the deal, some portion of taxes from the largest corporations would go to the nations where the revenue is earned as well as to the nations with corporate headquarters.
But the plan leaves little for the nations with few corporate headquarters and lesser purchasing power. As the Nigerian ambassador to the Organization for Economic Cooperation and Development (OECD), Mathew Gbonjubola, recently said, “Developing countries,” which supply much of the source material for production, “may get next to nothing.” Would the new tax proposal just make the richer nations richer?
After last week’s successful negotiations, U.S. Treasury Secretary Janet L. Yellen claimed, “The G-7 economies came together to agree the post-pandemic world must be fairer, especially with regard to international taxation.” But an earlier generation of economists and policymakers had more ambitious aspirations for a fairer world. They called for taxes that would transfer funds from wealthier nations to poorer ones. Their plans aimed to alleviate global poverty through international collaboration. These long-forgotten proposals might help us address the global inequities of our own day.
From World War II on, economists floated ideas for international taxation. In the wake of the war, with the growing hope for global cooperation, especially in the new United Nations, they imagined taxes that might move beyond the nation-state. Some of the early ideas aimed at funding the United Nations or repairing war-torn economies. By the 1960s, the discussion had shifted toward international taxation as a form of multilateral aid for developing nations. African socialists, European social democrats and religious humanists spoke of the evils of poverty and asked the global North to offer more economic assistance to the global South.
Left-leaning development economists responded with ideas for international taxes that would narrow the gap between the richer and poorer nations. In 1964, for example, British economist Dudley Seers proposed an “automatic international machinery for redistributing resources,” allowing countries “which lag in development” to receive assistance from the international community. And in 1970, Swedish economist Gunnar Myrdal advocated for international taxation in his popular book “The Challenge of World Poverty.” For Myrdal, such a tax could transfer funds “to underdeveloped countries as a collective responsibility for the developed countries.” He envisioned a welfare state transformed internationally into a welfare world.
Building on earlier protests of economic exploitation, leaders from the global South formalized their own proposals for transferring resources and passed them in 1974 as part of the U.N. Declaration on the Establishment of a New International Economic Order (NIEO). The following year, in support of the NIEO, the U.N. General Assembly endorsed automatic contributions to the global South. It requested an increase in “financial resources to developing countries,” with transfers “made predictable, continuous, and increasingly assured.” For post-colonial leaders, this was a form of taxation seen less as foreign aid and more as reparations.
In the late 1970s, with growing attention to inequality and Earth’s limited resources, the idea of an international tax gained traction. Economists and anti-poverty activists imagined taxes on minerals extracted from the ocean floor, pollution, arms sales, gross national products, consumer spending, income, financial transactions, international travel and, yes, multinational corporations. The proposed taxes would be used to protect the environment and fulfill the basic needs of the world’s poor.
In 1978, with funds from the Rockefeller and Ford foundations, the Brookings Institution explored the feasibility of various proposals in a book-length report on “New Means of Financing International Needs.” But the idea of international taxation needed wider publicity and political backing more than it needed a technical study.
It got its loudest airing in the report of the Independent Commission on International Development Issues. Known as the Brandt Commission, named for its chair, former West German chancellor Willy Brandt, it released “North-South: A Program for Survival” in 1980. Brandt and his fellow commissioners called for “universal taxation,” with revenue collected from all nations and redistributed to the poorer ones.
The report was translated into more than 20 languages. It made a splash in Europe, especially among social democrats. It was, the Christian Science Monitor stated, “a bestseller in Britain.” And it won support from leaders in the global South.
But the timing could not have been worse in the United States. When the report came out, the Carter administration was preoccupied with the Iran hostage crisis, the Soviet invasion of Afghanistan and the upcoming election. And after Ronald Reagan won the presidency, his budget-slashing, tax-cutting agenda swept any talk of an international tax off the administration’s table.
The Brandt report asked for an international summit to discuss its recommendations, and in the fall of 1981, the summit took place in Cancún, Mexico, with the leaders of 22 nations attending. The Reagan administration made its position clear. Secretary of State Alexander Haig Jr. stated that “to transfer resources in a wholesale way” was “a conception we reject.”
In the years after, ambitions receded. As faith in the market rose and faith in the state declined, a redistributive tax seemed less and less likely. While poverty declined in some nations — China, most notably — it remained deeply entrenched in others. According to the World Bank, more than 700 million people lived in extreme poverty in 2015, including much of the population of eastern, western and southern Africa.
Now, in our ongoing global pandemic, the economic gap between wealthier nations and poorer ones is widening. And the unequal access to vaccines suggests that, as the wealthier nations recover, pandemic-related poverty will continue to rise in Africa, Asia and Latin America at least through 2021.
A redistributive global tax could help us face the global poverty, public health and climate crises of today. If the idea has a utopian ring that seems beyond the pale, it’s worth remembering that there was a day when our current and common redistributive policies — progressive income taxes, say — sounded unsellable, unworkable and wholly unlikely.
Indeed, the idea of international redistributive taxation — on corporations, wealth, financial transactions and pollution — has taken on new life. Activists and intellectuals, including French economist Thomas Piketty, author of the blockbuster book “Capital in the Twenty-First Century,” have reanimated the earlier calls for international taxes that directly address inequality. What was impossible last week might be possible tomorrow.