The World Today for June 21, 2021
NEED TO KNOW
A Taxing Issue
At their recent meeting in Britain, leaders of the Group of Seven industrialized nations accepted an American proposal to impose a minimum global corporate tax. The new levy would “address the tax challenges arising from globalization and the digitalization of the economy,” wrote the Hill, citing a press statement.
American Treasury Secretary Janet Yellen tweeted that a minimum tax of 15 percent would make it harder for multinational corporations to escape payment by shifting profits to tax havens around the world. “That global minimum tax would end the race-to-the-bottom in corporate taxation,” she wrote, according to Voice of America.
Citing University of California at Berkeley and University of Copenhagen analysts, the Washington Post editorial board in a positive assessment of the global minimum tax proposal noted how companies moved $700 billion of profits to tax havens in 2017. The analysts estimated that governments would have collected $105 billion on those revenues if the taxman could have reached them.
Organization for Economic Co-operation and Development Center for Tax Policy Director Pascal Saint-Amans estimated that the global minimum tax would generate $150 billion in public revenues that could help pay for schools, infrastructure and other needs in countries where these companies conduct business, reported Bloomberg.
At a press conference that Reuters covered, German Finance Minister Olaf Scholz said the new tax regime would amount to a “revolution.”
The world is a long way from realizing that windfall, however.
Investment bank Goldman Sachs is playing down the proposal, saying it won’t affect how multinationals operate much and faces significant hurdles that might stop it from ever taking effect, CNN wrote.
Members of the Group of 20 largest economies in the world, particularly China and India, must approve the proposal for it to work. And China will likely seek exemptions from the rule. It has reduced taxes below 15 percent for key industries that produce advanced technologies that leaders in Beijing consider essential to the country’s growth and development.
Another challenge will be convincing Ireland, also a member of the G20, to give the ok. The Emerald Isle’s tax rate of 12.5 percent has made it a favorite tax haven for big companies. Irish leaders told Sky News they would not raise their taxes to conform with the proposal.
Switzerland is similarly considering subsidies to some industries to help offset higher taxes, added the Financial Times.
American companies and the American officials who support them have also been happy with the old tax regime that has allowed them to bypass the Internal Revenue Service, the New York Times added.
The global tax might be an idea whose time has come. But many will kick and scream before they accept it.
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