Fortunately, there has been some progress. The African Union continues to champion the United Nations Framework Convention on International Tax Cooperation; Colombia, Brazil, Spain and Tunisia have passed progressive tax reforms; the French public has expressed strong support for a 2% tax on the super-rich; and an initiative proposed in California would impose a one-time 5% tax on the net worth of billionaires.
However, the issue of tax fairness remains fiercely contested. At the OECD/G20 Inclusive Framework negotiations in early January, more than 145 countries agreed to give large U.S. multinationals full discretion. The OECD/G20 process, initially compromised by the imbalance of power, was easily submitted to by US President Donald Trump. After intense US lobbying, large US energy, technology and pharmaceutical companies secured significant exemptions from the 15% global minimum tax agreed in 2021 after a decade of painstaking negotiations.
Of course, the OECD/G20 Inclusive Framework could not openly announce its capitulation. Instead, it suddenly “discovered” that the existing US tax regime is equivalent to the second pillar of the original agreement, implying that other countries are prohibited from levying additional taxes on multinational corporations headquartered in the US.
But this is not the same: the global minimum tax is calculated on a country-by-country basis, whereas the U.S. rules apply to the total profits of U.S.-based multinationals abroad. The latter allows companies to offset high taxes paid in some countries with zero taxes paid in others, thereby restoring the benefits of zero-tax jurisdictions.
This new agreement not only fundamentally undermines the principle that multinational corporations should pay a minimum coordinated tax rate regardless of where they operate, but also gives U.S.-headquartered multinationals a competitive advantage over other multinationals that are still subject to the 15% global minimum tax. The mechanism of this capitulation has proved revealing. Under threat of U.S. retaliation, G7 leaders tentatively agreed new terms in June, and Inclusive Framework members approved them last month to avoid another spat with Trump.
As Oswald Spengler warned a century ago about the collapse of democracy and the rise of Caesarism, “the forces of the dictatorial money economy” are destroying the regulatory state and multilateral cooperation. Trump’s aggressive neomercantilist strategy – unilaterally imposing punitive duties, threatening and imposing blockades, kidnapping national leaders, using aircraft carriers as privateer ships, and proposing “world councils” designed to restore colonial control – circumvents existing international institutions wherever possible. The goal is to appropriate resources and prevent access by perceived rivals such as China.
Contrary to Trump’s pressure.
But no country should give up its sovereign right to tax multinational corporations and the super-rich. Giving up this prerogative is not only morally bankrupt and strategically misguided, it is also economically unwise.
To see this, consider Brazil’s economic recovery under President Luiz Ignacio Lula da Silva, Spain’s sustained growth under Prime Minister Pedro Sánchez, or Colombia’s growth after the introduction of progressive tax reforms by former Finance Minister José Antonio Ocampo. These governments have opposed Trump and are leading a global democratic counter-reactionary coalition. Their success provides strong empirical evidence that progressive fiscal policies and increased state capacity correlate with positive economic performance and greater social cohesion.
Many in Europe are also beginning to realize this. In France, the “Zucman tax” – Gabriel Zucman’s proposed minimum 2% tax on the wealth of the super-rich – enjoys nearly 90% public support and dominates the national debate. Although it was initially rejected by the National Assembly, it will be up for debate again this year.
Similarly, in December, Tunisia approved a new 0.5-1% tax on global assets (including real estate, stocks, bonds and cryptocurrencies) of residents with more than $1 million in assets. In California, voters this year will decide whether to impose a one-time 5% tax on the fortunes of billionaires to fund health care, food assistance, and education. (Notably, the initiative is getting support even from some billionaires.) And in New York, negotiations will resume on the Framework Convention on International Tax Cooperation at the United Nations, a forum less vulnerable to corporate capture.
A framework convention is necessary
True, one of the Trump administration’s first acts was to withdraw from these negotiations. But the rest of the world decided to continue. The goal is to develop a Framework Convention and two preliminary protocols – one on the taxation of cross-border services and one on dispute resolution – for approval by the General Assembly in 2027. A key issue is how the rights to tax the profits of multinational corporations should be allocated. Also up for discussion are new taxes on cross-border services (including digital services), new obligations for countries to tax the super-rich, and improving the exchange of information between countries on beneficial ownership of assets.
Current tax rules for multinational corporations, developed in the 1920s, are no longer appropriate for today’s digital economy. Negotiators in New York should seize this unique opportunity. They should abandon the fiction that a multinational enterprise is merely a collection of independent entities – a fallacy that large corporations use to shift profits to low-tax jurisdictions, thereby abusing OECD recommendations. A unified approach to taxation is long overdue. The current structure deprives governments of at least $240 billion a year, forces local firms to compete on unequal terms, and results in higher taxes on workers (whose income is less mobile) as countries try to make up for lost revenue.
Global income of multinationals should be allocated across jurisdictions based on verifiable factors such as sales volume and number of employees, rather than on the outdated principle of “market-based” transactions. The text of the tax convention should reflect this. Otherwise, the current, deeply flawed rules will become entrenched, and the pursuit of “compatibility” with the existing framework developed at the OECD will jeopardize both the ambitions and objectives of the UN tax convention.
The result would be another fruitless adjustment to an inefficient system. If democracy is to triumph over Caesarism, we must tax extraordinary wealth – and we must do it quickly.
Joseph E. Stiglitz
Joseph E. Stiglitz,
Nobel Prize-winning economist, former chief economist of the World Bank, former chairman of the U.S. President’s Council of Economic Advisers, professor at Columbia University, and author, among other things, of The Road to Freedom: Economics and the Good Society (W. W. Norton & Company, Allen Lane, 2024).
Jayanti Ghosh
Jayanti Ghosh,
professor of economics at the University of Massachusetts Amherst, is a member of the Commission on Transformational Economics of the Club of Rome and co-chair of the Independent Commission on International Corporate Tax Reform.
© Project Syndicate, 2026.
www.project-syndicate.org
