If I had to admit to my biggest professional failure over a long career, it would be ‘telling it like it is’. Not for me the, ‘Oh my God! I don’t believe you did that, and if you don’t use my very expensive services, you may be heading for prison,’ when the true risk of incarceration was about as high as accidentally drowning in the office lavatory at the end of the meeting. Indeed, I only once actively panicked a prospective client over a tax issue, offering to negotiate with the authorities. They promptly went to another Big 4 firm, where they received soothing advice that they did not need to do anything, only to be criminally (and very publicly) prosecuted three years later. It would be superhuman of me to say that I did not experience schadenfreude. I experienced schadenfreude.

In any event, it seems that, in the modern world, if you want to get ahead, you must be loud and sensationalist. In Israel (and just about everywhere else) nowhere is this approach more prevalent than in the media.  So, I don’t know why I got so upset over the weekend with the hyped nonsense being published about Saturday’s announcement by US Treasury Secretary Janet Yellen, at the G7 summit in London, that finance ministers had agreed a global corporate tax rate of ‘at least’ 15%. If you waded through the local newsprint, you will have understood that there had been an overnight revolution condemning islands like Cayman, Bermuda, St Kitts and Nevis, Bahamas, Ireland and Cyprus to poverty, while ever-adaptable little  Israel had to deal urgently (for the umpteenth time) with its 60 year old tax incentive law. That law gives glorious tax advantages to foreign companies setting up operations in Israel, while providing a competitive tax edge for Israeli companies in the export market.

Waidaminnit!

There was nothing revolutionary in the discussions – they had been going on, in one form of another, since the last UK-held summit, hosted by then prime minister David Cameron, in 2013. Governments across the globe had been gradually (in fairness, not so gradually) coming to terms with the 15 ‘Actions’ of the OECD’s Base Erosion and Profit Shifting program designed to make the international tax scene fairer. Last weekend was, finally,  ‘Action 1’, the most difficult because it dealt with the digital economy which has sort of proven that the hundred-year-old-plus system of permanent establishments (taxable branches in foreign countries) and other territorial based provisions literally no longer delivers the goods. Long before last weekend, Action 1 had two ‘pillars’ – the first aimed to share the profits of large multinationals (provisionally digital companies, but to be expanded) more fairly than has been the case, due to their lack of physical presence in many of their target countries; the second aimed to establish a minimum tax to be charged by large multinationals – the idea being that, if – for example – Ireland was charging its 12.5% tax rate on the profits of the local subsidiary of a US multinational, the US would mop up the difference to the minimum rate (currently mooted at ‘at least 15%). The Irish would then have no advantage in charging their lower rate.

The only newsworthy item on Saturday was that the G7 had all agreed on the broad approach.

If none of this was a surprise – for Israel, Ireland, and plenty of the others, there was another elephant already in the room. The 2018 US tax reform included something called GILTI (Global Intangible Low-Taxed Income) which – if you hold your breath and don’t look too closely – is much like the minimum tax Ms Yellen was talking about. And it is already there. Currently, it sets the lower limit at 10.5%, but that is due to rise automatically to 13.125% in 2026 and, if President Biden ups the standard corporate tax rate as he wants to, it will rise further.

So, what are the Israelis (and Irish) screaming about? It has been abundantly clear for some time that tax incentives are not the future for attracting US multinationals. Thought should already have been given to other methods, for example using the unwanted tax revenue to plough back grants into the multinationals’ local subsidiaries. And, as regards Israeli multinationals, there will only be, at most, a handful that will meet the high income bar for minimum tax.

As for the future, the devil is in the detail. Implementation will be supremely complex – but that is unlikely to attract the attention of the quick-fix press.

Bottom line – for Israel, Sunday morning was much the same as Friday morning, other than many households having even more to chuck into their wastepaper baskets than usual.