Around 100 years ago, the U.K. fumed as the wealthy Vestey brothers shifted their family business to Argentina to escape the long arm of London tax collectors. As the multinational used ever-more-elaborate schemes to shuffle profits, including creating a trust in Paris, the authorities likened attempts to tax the Vesteys to “trying to squeeze a rice pudding.” The relevant loophole, which outraged the public, wasn’t closed until the 1990s.

Today’s rice-pudding squeezers have a new breed of multinationals in sight: Tech companies such as and Facebook that sell their services to consumers around the world yet pay little or nothing in tax.

Part of the problem is a global system rife with low-tax jurisdictions and smart advisers helping firms devise ingenious Vestey-esque ways to pay as little as possible. But it’s also about the system’s failure to adapt to the digital age.

Corporate tax rules requiring a physical presence make it harder to tax businesses in the virtual world. The European Union recently estimated a 14-percentage-point gap in the tax rate between digital companies and bricks-and-mortar rivals.

Hence why, from a historical perspective, the G7 tax deal struck over the weekend is such a big deal. Its minimum effective tax rate of 15% puts tax havens on notice. And its accompanying measure promises to tax the biggest multinationals above a certain threshold and reallocate the proceeds fairly around the world. This would supersede existing rules, and allow countries a crack at collecting tax where they couldn’t before.

It’s taken decades of pressure, a financial crisis and a pandemic to get to a point where globalization means tax convergence and not competition. Big countries found it relatively easy to ignore low-tax rivals when profits were on the up, but they now have little time for a race to the bottom on tax rates with climate change, inequality and pandemic management calling for more investment.


The playing field needs leveling: A country like Ireland (headline rate 12.5%) would stand to lose around 2 billion euros ($2.4 billion) in tax revenue, while France (headline rate 26.5%) would gain around 5 billion euros, according to national estimates.

As the G7 shops its initiative farther afield, not everyone is going to be happy: Ireland has made clear it intends to defend its way of doing things. Successive Irish governments have backed corporate tax as one of the few areas where Ireland can compete globally. U2 singer Bono has crooned that it gave his homeland “the only prosperity it’s ever known.”

Yet there’s real political momentum here, and palpable public outrage. It’s one thing to build a national identity around a 12.5% tax rate. But last week, the Guardian reported that an Irish subsidiary of Microsoft Corp. paid zero corporation tax thanks to its residency in Bermuda. In 2014, Apple Inc. was estimated by the European Union to have paid a 0.005% tax rate. This is increasingly about corporate, not national, sovereignty.

The real risk is of future loopholes to come. Enforcement and tax collection will be a big part of making this deal stick: Listen hard and you can almost hear the cogs of wonkish brains whirring to spot new gaps in a system that’s already insanely complex. Simplification and clarity are both needed to avoid the global tax system collapsing under its own weight.

Still, getting to this stage is a victory in itself. No doubt the spirit of the Vesteys will live on, and new creative ways to dodge taxes will be found — but if the current revamp lasts another 100 years, it will be worth it.