Wealth inequality around the world has increased dramatically since the 1980s with the top one percent owning 40 percent of the world’s wealth. In the US, this problem is even more severe with the top 0.1 percent owning more than the bottom 90 percent. This inequality is exacerbated by financial crises like the 2008 recession and a global pandemic, and even if tax rates are fair in a country, the issue of tax evasion is still a huge problem, one that a new European accord is attempting to address.

Although some US politicians are advocating for a more progressive and enforced tax bracket, European countries are generally ahead of the US on addressing income inequality. Most recently, G7 finance ministers have announced their intention to support a global accord to tackle the billions of dollars in lost revenue due to tax evasion. 

The goal of the new accord is to set rules on taxing cross-border digital activities as well as a minimum higher tax rate for companies that channel profits via low-tax countries, such as Ireland. Research from ActionAid International finds that not increasing taxes, but merely preventing tax evasion from big companies like Amazon, Apple, Facebook, Alphabet, and Microsoft would yield $32 billion in additional revenue for G20 countries. 

Kiran Aziz, a sustainability analyst at Norway’s largest pension fund, KLP, told Reuters, “It’s not about paying more tax, it’s about paying the right amount of tax. We want companies to not engage in practices through transactions and legal structures which contribute to tax evasion.”

In a globalized world, it’s increasingly easy for companies and even individuals to evade taxation through loopholes and offshore accounts. G7 finance ministers recognize that collective action is the only way to address this issue, but fortunately, this action will also yield collective benefits for participating countries.