More than a decade has passed without any progress in bringing the global tax system into the modern age. But less than three months after taking office, President Joe Biden has raised hopes of a breakthrough, with proposals that could kill tax havens dead and force multinationals to pay a fairer share of tax.

The change in tone could not be more marked. With last week’s proposal for a global minimum corporate tax rate, Washington has turned away from years of economic orthodoxy that stretched back to the early 1980s and prioritised a neoliberal world vision – of free-market competition, government indifference and unblinking advocacy of globalisation.

Under proposals submitted to tax negotiators from 135 countries at the OECD, the Biden plan would force big companies to pay taxes where their revenues are earned, not where the profits can be shifted to. It would also establish a global minimum tax rate, agreed by the world’s biggest economies.

This is a powerful development. For years, big companies have weaved a merry dance through a broken patchwork of international tax rules, advised by an army of lawyers and accountants on where to locate to reduce their bills.

The free-market economists favoured by presidents past would have argued for the advantages of globalisation: cheaper products, more choice. But profit-shifting by big companies – turbocharged in the digital age, with its unparalleled ease of doing business across borders – has left government coffers increasingly short. According to the Tax Justice Network, the sums lost to exchequers around the world have risen as high as £311bn annually.

This comes at a time when Covid is driving up national debts to eye-watering levels. Public anger at tax avoidance, and demands on companies to pay a fair share, have also risen since the 2008 financial crisis.

US multinationals are serious offenders. The proportion of gross profits they shift into tax havens has soared from 5-10% in the 1990s to between 25% and 30% today.

In a race to the bottom designed to attract big companies to competing jurisdictions, the average statutory corporate tax rate across 109 countries assessed by the OECD dropped from 28%

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