Global minimum corporate tax: US receives support from France and Germany for 21% tax plan, World News
The US proposal envisions a minimum corporate tax rate of 21% with the support of France and Germany. This decision will give new impetus to efforts to overhaul global rules despite the reluctance of certain small European countries.
The United States has proposed that countries be able to tax more corporate profits based on income within their borders in a bid to reach a global tax deal, according to two people close to the U.S. offer.
U.S. Treasury Secretary Janet Yellen threw the weight of the U.S. government behind pushing for a global minimum corporate tax rate, possibly paving the way for a long-awaited deal updating international tax rules for the first time in a generation.
“If the Biden administration proposes a rate of 21% and there is a consensus, that would be acceptable for us,” French Finance Minister Bruno Le Maire said.
WHY A WORLDWIDE MINIMUM TAX?
Large economies seek to discourage multinational corporations from shifting their profits – and tax revenues – to low-tax countries, regardless of where their sales are made. Increasingly, revenues from intangible sources such as pharmaceutical patents, software and intellectual property royalties have migrated to these jurisdictions, which has allowed companies to avoid paying higher taxes in their countries. of traditional origin.
With a widely accepted global minimum tax, the Biden administration hopes to reduce this erosion of the tax base without putting U.S. businesses at a financial disadvantage, allowing them to compete on innovation, infrastructure, and other attributes.
The Trump administration first attempted to capture revenue lost to tax havens with a US minimum tax on offshore companies in 2017. The Global Intangible Low-Taxed Income, or GILTI, the tax rate was only 10.5% – half of the national corporation tax. rate.
HOW WOULD GLOBAL MINIMUM TAX WORK?
The overall minimum tax rate would apply to corporate profits abroad. Therefore, if countries agree on an overall minimum, governments could still set whatever local corporate tax rate they want.
But if companies pay lower rates in a given country, their home governments could “top up” their taxes at the agreed minimum rate, eliminating the benefit of shifting profits to a tax haven.
The Biden administration has said it wants to deny exemptions for taxes paid to countries that do not accept a minimum rate.
The OECD said last month that governments have already broadly agreed on the basic design of the minimum tax, although the rate remains to be agreed. International tax experts say this is the thorniest issue.
Other points to be negotiated include whether sectors such as investment funds and real estate investment trusts should be covered, when to apply the new rate and ensure that it is compatible with tax reforms. 2017 initiatives aimed at deterring the erosion of the tax base.
(With contributions from agencies)