Further talks to enforce a global minimum corporation tax will likely last a while after G7 finance ministers agreed to set it at a minimum of 15 percent.
The agreement prior to the G7 summit in Cornwall in the UK was only the beginning of a taxation reform that is bound to have a far-reaching impact on small countries and places dependent on low taxation.
The next move the group of developed nations will have to make is to seek wider support from non-G7 members in the G20 and the Organization for Economic Cooperation and Development.
Will it be a round of tussles at the G20 when finance ministers from its members -including China and Russia - meet in Venice next month?
Beijing has not yet publicly commented on the G7 deal but it can be imagined that it would be in its interest to demand the US to lower or lift trade-war tariffs in exchange for its support to setting a global minimum for corporation tax.
The deal reached by the US-led G7 bloc is twofold.
First, it seeks to plug a loophole allowing multinational giants to exploit gaps between jurisdictions. For example, Ireland has been blamed by its European Union peers for providing multinational giants a tax haven even though their profits are mostly made in other EU states.
Second - which may have direct implications for Hong Kong - a 15 percent baseline is set for global tax so that any multinational corporations paying less than that somewhere will have to plow the outstanding back to the countries to which they belong.
For example, the US will likely receive billions of dollars more each year from American companies operating overseas.
If it is also agreed at G20 and OECD, the revamped global tax regime will have far-reaching implications on low-taxation jurisdictions like Hong Kong.
The 15 percent baseline is lower than expected as the Joe Biden
administration had proposed a 21 percent starting point. It's likely that the compromise was reached to lay the framework first to pave the way for future add-ons.
The corporation tax in Hong Kong currently stands at 16.5 percent - meaning foreign companies operating here are already paying more than the minimum.
If the minimum is increased in future, these companies will no longer benefit from the tax difference and will have to plow the different amount back to their governments.
What does this mean? Hong Kong cannot depend on low taxation in the long term to keep foreign companies in the SAR. Financial Secretary Paul Chan Mo-po must evaluate the long-term impacts with a view to drawing up alternatives to maintain the SAR's competitive edge.
After the pandemic, it will be tempting for major economies like the US and EU to work to increase the minimum to bolster their share of tax revenues to provide for economic recovery at home. The pressure will be obvious.
Tech giants like Amazon, Google and Apple are likely to be the first to have to pay more. However, the global environment for doing business will be reshaped in the long term to place greater emphasis on the developed countries.