The G7 meeting will be significant for Australia
There have been murmurings of discontent over the fact that Scott Morrison is travelling to Britain this week for the G7 meeting in Cornwall. The carpers are complaining that he is going on a junket while Victorians are suffering in lockdown.
It is a reprise of 'the holiday in Hawaii while the bushfires were raging' critique.
However, this meeting will be more than just ‘a getting to know you’ with important world leaders, although the PM will have bilateral meetings with President Biden, President Macron of France, Prime Minister Suga of Japan, Boris Johnson and President Moon of South Korea. During these bi-laterals the emphasis is likely to be on the pandemic, climate change and responses to China’s increasing assertiveness.
The G7 is the summit meeting of the seven biggest market economies in the world. Russia and China are excluded, although they are members of the G20. Eventually, China will have to be included because of the size of its economy. To date, the G7 has been dominated by a trans-Atlantic agenda and it has largely ignored the Asia-Pacific region. There are pressures for this to change generated by the spectacular growth of Asian countries and the increasing Chinese influence in the region.
The secretary-general of the OECD, Mathias Cormann - a former Australian finance minister - has said he wants the organisation to strengthen its ties with China and the ASEAN countries. Scott Morrison will use Cormann as an ally to push the North Atlantic countries to lean towards the Asia-Pacific while at the same time pushing to tighten the rules applying to the international trade and payments system.
From this perspective, the new agreement on the international taxation of mobile global capital, which is likely to be approved at the meeting, is a good start. This is an agreement that international companies with the capacity to shift capital to tax havens will be taxed on a global basis and the revenue divided between countries based on a predetermined formula. The basic rate of taxation will be 15 per cent.
This does not mean that national rates of taxation will be set at 15 per cent. Countries will be free to set their own rates. The USA will have a corporate rate of 28 per cent, close to Australia’s 30 per cent. However, it means that companies like Facebook and Amazon will pay a minimum of 15 per cent of their profit in tax regardless of where they are domiciled. Eventually, the OECD countries will adopt the new agreement and over time they will probably move to harmonise their tax systems to eliminate tax rorting.
Australia will receive a lot of attention at the G7 meeting because of its success in dealing with the pandemic and the strength of the economic recovery.
The prime minister can use all the plaudits he can get at the moment, given the dint his reputation has taken at home, where anything short of perfection is deemed a failure.