- The Biden administration offers an international minimum tax rate for corporations.
- Republicans are unlikely to support it, as they do not want to cede the local tax authority overseas.
- Last week, there was criticism of the McConnell minimum tax.
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The Biden administration took a significant step closer to achieving one of its key tax targets over the weekend when the G-7 group of major global economies announced that it had struck a deal to collect a minimum tax of 15% on multinational corporations.
The G-7 deal marks the beginning of a potentially historic measure and signals support from key allies for a deal that would affect tax havens ̵
The agreement contains a pair of boards that, if adopted, will increase the amount of taxes paid by large companies. The first is an agreement with large tax companies wherever they operate, not just where they are based. This would open large technology companies such as Amazon and Facebook to new taxes in European countries.
The other is a 15% minimum corporate tax rate aimed at setting the bottom so that companies cannot relocate their operations to a lower-tax country and pit large economies against each other.
“This global minimum tax will put an end to the race to the bottom of corporate taxation and provide justice for the middle class and working people in the United States and around the world,” Treasury Secretary Janet Yellen said in a statement Saturday.
However, Republicans are unlikely to support the measure, arguing that it reduces the country’s economic competitiveness abroad and gives way to foreign tax decision-making.
Yellen has emerged as a vocal supporter of the tax, constantly urging him to take office. She called for the new fee in her first major address as finance minister.
She said this would ensure that “the global economy thrives on a more equal level of taxation of multinational corporations and stimulates innovation, growth and prosperity.”
The G-7 followed the US leader on how high the percentage should be. Reports in late May said the United States had offered a 15% rate lower than the expected 21%. But that’s the percentage the G-7 ultimately agreed to, unlike the draft proposal seen by Reuters, which has no number attached.
The tax complements US proposals to raise corporate rates in the country.
President Joe Biden is pushing to increase the corporate tax rate to 28% from 21%, a partial reversal of Republican tax cuts in 2017. Yellen defended the measure in an interview with The New York Times on Sunday: “Honestly, I don’t think will have a significant impact on corporate investment. “
White House and Senate Republican talks on a bipartisan infrastructure package are now entering their fifth week with little sign of progress, and The Washington Post said Wednesday that Biden has made a $ 1 trillion infrastructure plan that cancels corporate tax increases. and would charge at least 15% instead.
Even the idea of a new minimum tax as part of the deal sparked early Republican criticism. “I don’t think my party members will like it, and I think it’s going to be hard to sell to Democrats,” Senate Minority Leader Mitch McConnell said in Kentucky on Thursday.
Republicans are now firmly opposed to any tax increases. Senator Shelley Moore Capito of the West Virginia, the GP’s chief negotiator, has long called the corporate tax increase a “non-negotiable red line.”
But while the global minimum tax may seem like a promising first entry into what is taking shape as a hot tax summer, there is still a long way to go before it becomes something close to the law. The G7 proposal is a strong endorsement, but the measure is targeting the G20 next, according to The New York Times. From there it comes to the OECD group, which bears taxes.
And if and when the OECD agrees with a framework, the measure will probably have to be adopted through legislation. This is where Republicans can come in and sink it.