President Joe Biden’s corporate tax plan got a boost on Thursday when 130 countries and jurisdictions signed an agreement that would introduce a global minimum tax for businesses. The government says the deal, the first major overhaul of international taxation in a century, will level the playing field and help American businesses become more competitive.
Treasury Secretary Janet Yellen, who led the US government for a minimum global tax of at least 15%, called the announcement a historic day for economic diplomacy.
“Today’s unification of 130 countries, which represent more than 90% of global GDP, is a clear sign: the race to the bottom is one step closer to the end. In its place America will enter a competition that we can win on the skills of our employees and the strength of our infrastructure, “Yellen said in a statement.” We now have the chance to build a global and national tax system that American workers can use and enables companies to compete and win in the global economy. ”
Yellen said lower tax rates not only did not attract new businesses, but also deprived countries of funding for infrastructure, education and efforts to fight the coronavirus pandemic.
The two-part framework, coordinated by the Organization for Economic Co-operation and Development, was the first signed by the G7 countries In early June, their top tax officials met in London.
There are countries where a company does business have the right to tax $ 100 billion in profits from multinational corporations, including digital profits, regardless of the company’s home country or whether it has a physical presence in the country. It also supports the implementation of a global minimum tax of at least 15%. The OECD estimates that the minimum global tax would generate around $ 150 billion in additional global tax revenue annually.
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“After years of intense work and negotiations, this historic package will ensure that large multinational companies everywhere pay their fair share of taxes,” OECD Secretary General Mathias Cormann said in a statement. “This package does not eliminate tax competition as it should not, but it does set multilaterally agreed limits on it.”
Countries that have signed the agreement include some of the largest economies in the world, including China and India. However, there are still some reservations, even in countries with some of the lowest corporate tax rates such as Ireland and Hungary. Yellen said the agreement doesn’t need every country to be successful.
The Biden government’s move to introduce a global minimum tax is part of a broader tax proposal that also includes major overhauls of the U.S. corporate tax system, including a rise in the rate from 21% to 28% and an increase in the minimum tax on US multinational corporations from 10.5% to 21% which would be calculated on a country basis.
Mr Biden praised the deal on Thursday, saying he promised to lead the world to deliver a foreign policy for the middle class. He also stressed the need to reform corporate tax law in the United States.
“Building on that agreement also requires us to take action here at home. It is imperative that we reform our own corporate tax laws, as I suggested in my “Made in America” tax plan. We must have proposed passing the global minimum tax, among other measures, to ensure businesses pay their fair share, “he said in a statement.” Congress should pass my Made in America tax plan to bring home and pay well-paying jobs ensure our tax law works for families, workers and small businesses, not just profitable corporations and billionaires. “
All changes to United States taxation must be passed by Congress. Republican lawmakers have already criticized the effort, as has promised not to make any changes to the tax law Adopted under President Donald Trump.