Former OECD Deputy General Calls G-7 Tax Deal ‘Half-Baked’

Yuko Takeo and Emi Urabe, Bloomberg News

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Historic. Groundbreaking. Those are some of the words that have been used to describe the compromise struck last week by the Group of Seven to try to make multinational corporations pay their fair share of taxes.

“Murky” and “half-baked” are two other ways to characterize it, according to Rintaro Tamaki, a former deputy secretary general at the Organization for Economic Cooperation and Development who oversaw tax policy for six years.

After years of making little headway, the wealthy nations of the G-7 last week reached a broad agreement to try to stop corporations from seeking tax havens and to force some of the biggest companies like Amazon.com Inc. and Facebook Inc. to pay tax in the countries where they sell goods and services, regardless of whether they have a physical presence there.

Read more: Tamaki Says Japan’s Finance Ministry Ignores Climate Risk

Tamaki, the OECD’s top tax official from 2011-2017 and a former senior official at Japan’s finance ministry, says the deal represents significant progress but is short on detail.

He worries the agreement may have lost some of its punching power because of a decision to apply one of its key provisions to a small group of just about 100 companies.

“If you’re really trying to move to a completely new system of taxation that incorporates intangible assets, this is a very half-baked agreement,” Tamaki said. “It’s only targeting the most obvious firms. So you don’t know if this will truly create a new system.”

Next month, the G-7 countries will have to sell the plan to finance ministers from the broader Group of 20 nations at a meeting in Italy.