The Biden administration hopes the move will end competition to lure companies in countries with low tax rates, which will ultimately wipe out the government coffers.
The U.S. has proposed that countries agree to a 15% worldwide minimum corporate tax in international negotiations aimed at ending competition to lure companies through cheap pricing, which will ultimately ruin government revenue.
“We need to work multilaterally to end the pressures of corporate tax competition and destroy the corporate tax base,” the Treasury Department said in a statement on Thursday. “The Treasury has stated that 15% is a floor and that discussions should continue to be ambitious and push the rate higher.”
The offer, which comes from talks held this week, moves to the U.S. position of nearly the 12.5% rate mentioned by the Organization for Economic Cooperation and Development before the U.S. also joined the negotiations after the election of Joe Biden as president. The American move could help provide more impetus to reach an agreement in the summer, as desired by the OECD.
Some highly taxed countries – such as Ireland, which has a 12.5% corporate rate – are skeptical of the 21% rate previously proposed by the Biden administration for global revenue earned by U.S. companies. British officials are also concerned that the rate is too high for the long term – even if the UK intends to raise the corporate tax to 25% by 2023 to replenish public finances after the pandemic.
The Biden administration is trying to influence other countries in the OECD talks to agree to a rate higher than what the US can, so there is little inconsistency. The Treasury has given priority to a global minimum tax both in its proposals for improving U.S. international tax regulation, and in OECD negotiations.
The U.S. released a framework for global system change earlier in April, effectively also kicking off talks with nearly 140 countries after the Trump administration withdrew from negotiations.
The American proposals also set a goal to ensure that 100 of the world’s largest companies pay more in the areas where they actually trade. While questions remain about the implementation of such a measure, conflict resolution and what could benefit the poorest economies, the broader initiative re-injected momentum into a process that almost provoked a commercial war. during former President Donald Trump.
Treasury Secretary Janet Yellen’s approach has sparked a warm reception from larger countries that the Treasury has the most to get by taking profits from global companies operating in profitable markets. in the country. France is one of the endorsers of US moves. Some countries that get money from hosting multinationals have reservations.
In the main, Biden proposed to increase the corporate tax rate to 28%, from 21%. The idea has been developed by most Republicans and many business groups – saying it will make the U.S. less competitive, while important moderate Democratic Senator Joe Manchin called for a slight hike.
According to the OECD, changes to how tax rights are allocated could disburse nearly $ 100 billion, while the minimum tax column, combined with existing U.S. regulations, could boost revenues. in the world for governments up to $ 100 billion a year.