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US proposal for global minimum corporate tax finds takers in Europe
14 Apr '21
3 min read
Pic: Shutterstock
The idea of a global minimum corporate tax floated by the US has found takers in Europe. The $2.3 trillion infrastructure investment bill of the Joe Biden administration seeks to raise the money required by partly raising rates on US business and closing loopholes that allow domestic and foreign corporations to take advantage of lower taxes overseas.
The US treasury secretary, Janet Yellen, mooted the idea of a global minimum corporate tax at an event on April 6: "Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids. It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
During a speech at the Chicago Council of Global Affairs, Yellen said that the US would push the G20 for a global minimum corporate tax, since the world's inter-connected economy had led to "a 30-year race to the bottom on corporate tax rates."
The Donald Trump administration had in 2017 slashed corporate tax rates from 35 per cent to 21 per cent. The US now seeks to increase this tax rate to 28 per cent, and also impose a minimum tax of 21 per cent on US corporations no matter where they earn the income, up from the current 10.5 per cent (called Global Intangible Low-Taxed Income, or GILTI). The US needs a level-playing field at the international stage so that it is not seen as an unattractive destination for investment.
German finance minister Olaf Scholz welcomed the idea, describing it a "great step forward" in the battle to stem the erosion of government revenues. "The support of the USA gives this initiative a strong tailwind," Scholz told reporters. French finance minister Bruno Le Maire too spoke in favour of the idea: “A global agreement on international taxation is now within reach. We must seize this historic opportunity.”
The chief economist of the International Monetary Fund (IMF), Gita Gopinath favoured the global minimum tax on corporate profits, and said that the current disparities in national corporate tax rates had triggered “a large amount” of tax shifting and tax avoidance, reducing the tax base on which governments could collect revenues to fund needed economic and social spending.
European Commission spokesperson Dan Ferrie reaffirmed the commission's commitment to "ensuring that all businesses, including digital ones, pay their fair share of tax, where it is rightfully due,” and hoped that the US proposal would spur a new momentum towards agreement on a consensus-based global solution.
The Organization for Economic Cooperation and Development (OECD) has long been advocating cross-border tax rules that would include a global minimum tax rate for multinational corporations. The original OECD plan was meant mainly for digital giants like Google, Amazon, Facebook and Apple, among others.
The US treasury secretary, Janet Yellen, mooted the idea of a global minimum corporate tax at an event on April 6: "Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids. It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
During a speech at the Chicago Council of Global Affairs, Yellen said that the US would push the G20 for a global minimum corporate tax, since the world's inter-connected economy had led to "a 30-year race to the bottom on corporate tax rates."
The Donald Trump administration had in 2017 slashed corporate tax rates from 35 per cent to 21 per cent. The US now seeks to increase this tax rate to 28 per cent, and also impose a minimum tax of 21 per cent on US corporations no matter where they earn the income, up from the current 10.5 per cent (called Global Intangible Low-Taxed Income, or GILTI). The US needs a level-playing field at the international stage so that it is not seen as an unattractive destination for investment.
German finance minister Olaf Scholz welcomed the idea, describing it a "great step forward" in the battle to stem the erosion of government revenues. "The support of the USA gives this initiative a strong tailwind," Scholz told reporters. French finance minister Bruno Le Maire too spoke in favour of the idea: “A global agreement on international taxation is now within reach. We must seize this historic opportunity.”
The chief economist of the International Monetary Fund (IMF), Gita Gopinath favoured the global minimum tax on corporate profits, and said that the current disparities in national corporate tax rates had triggered “a large amount” of tax shifting and tax avoidance, reducing the tax base on which governments could collect revenues to fund needed economic and social spending.
European Commission spokesperson Dan Ferrie reaffirmed the commission's commitment to "ensuring that all businesses, including digital ones, pay their fair share of tax, where it is rightfully due,” and hoped that the US proposal would spur a new momentum towards agreement on a consensus-based global solution.
The Organization for Economic Cooperation and Development (OECD) has long been advocating cross-border tax rules that would include a global minimum tax rate for multinational corporations. The original OECD plan was meant mainly for digital giants like Google, Amazon, Facebook and Apple, among others.
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