If you are on a first date, tax harmonisation probably shouldn’t be on your list of conversation topics. It’s not normally something that gets people excited. Unless, it seems, they are a G7 finance minister. Or, I’m sad to say, me.
Last week the G7 agreed a minimum rate of corporation tax for companies trading in their countries. The aim is to avoid companies shifting people and profits to low tax states, closing some legal loopholes that allowed them to pay tiny quantities of tax. It’s not as high as many would like, at 15%. And there’s a lot of complexity behind the headline. But it is nonetheless an incredibly important step.
Small world problems
Corporation tax is what I would term a ‘small world problem’. Over the last few hundred years we have shrunk the world. Transport and communications technologies have brought us closer together. They have allowed companies to operate internationally, and migrate those operations to wherever conditions were most favourable.
Because of this, local action is pretty ineffective. Some countries have brought in ‘digital taxes’. But these have limited effect when companies can move their profits elsewhere.
The only answer is for everyone in the small world to work together.
Big world problems
Big world problems come about when power is too centralised. Because we can move information so fast now, we’re tempted to hold power a long way from where it is exercised.
Brexit is a big world problem. Not because power was unfairly hoarded in Brussels, though that was the perception. But because it was hoarded in Westminster. Many of us felt, and still feel, that we were disconnected from power. That we had little influence over it.
You can see this in the way people talk about politicians: “They’re all the same.” It’s hard to see the difference when they are so far away.
The only answer here, I believe, is to bring more power closer to people. Make its holders more visible and accountable.
These aren’t the only examples of big and small world problems. And they don’t only exist in politics. We can find them in our own organisations.
Poor customer service is often a big world problem. Power and control is too far from the customer. So the responses are slow and impersonal. As the customer we feel disconnected from the brand.
Slow strategic decision making is a small world problem. In a world that expects fast action, it is increasingly exposed.
Characterising big and small world problems
How can we characterise big and small world problems?
- Small world problems are created or exacerbated by the mobility of people, goods, and particularly information. Their s0lutions require visibility of the whole and co-ordination from the centre.
- Big world problems exist where the mobility of goods, people, or information are insufficient to overcome a sense of distance. Solutions require a speed of response and a sense of direct connection, usually only available through some level of proximity.
Can you see big world and small world problems in your organisation? And how will you go about solving them?