What could a new system for taxing multinationals look like?

FOR YEARS governments have grumbled, simmered and raged as multinational companies have shifted profits out of tax collectors’ grasp and into low-tax havens. The OECD, a club of mostly rich countries, estimated in 2015 that avoidance robs public coffers of $100bn-240bn, or 4-10% of global corporation-tax revenues a year. Now the fiscal fallout from covid-19 is adding urgency to governments’ efforts to claw some money back—most notably in America, where President Joe Biden plans to raise taxes on corporate profits, including foreign income.

Mr Biden’s proposals will grind their way through Congress. Finance ministers from the G7 group of countries are likely to discuss global tax reform when they meet in London on June 4th-5th. And later in the summer 139 countries will discuss changing the system for taxing multinational companies. The confluence of a political shift in America and a global push to raise more tax revenue to pay for the pandemic means a degree of optimism is in the air. The proposals under discussion may initially raise only a modest amount of revenue, but they still represent a big break with the past.

The foundations of the global corporate-tax system were laid a century ago. It recognises that overlapping taxes on the same slice of profits can curb trade and growth. As a result, taxing...