See this proposal in today’s NY Times. I offer a thought at the end to tax international arms sales.
U.S. Proposal for 15% Global Minimum Tax Wins Support From 130 Countries
A 15 percent minimum tax rate would generate $150 billion in additional tax revenue each year, the Organization for Economic Cooperation and Development said.
July 1, 2021Updated 6:58 p.m. ET NY Times
PARIS — An effort to push the most sweeping changes to the global tax system in a century gained significant momentum on Thursday when 130 nations agreed to a blueprint in which multinational corporations would pay an appropriate share of tax wherever they operate.
The deal approaches a goal that had proved elusive for the global community for decades as countries tried to prevent businesses from shopping for the jurisdiction with the lowest rates — what Treasury Secretary Janet L. Yellen called a 30-year “race to the bottom” on corporate tax.
The result of the negotiations, overseen by the Paris-based Organization for Economic Cooperation and Development and revived this year by President Biden, is also remarkable because it includes China, Russia and India among the signatories — large economies that had been wary of a tax overhaul.
The conceptual framework includes a 15 percent minimum corporate tax rate, which had been proposed by the United States, and rules that would force technology giants like Amazon and Facebook and other big global businesses to pay taxes in countries where their goods or services are sold, even if they have no physical presence there.Closing some of the most notorious tax loopholes in the world would generate an estimated $150 billion in additional tax revenue each year, said the O.E.C.D., the research and policy organization of the world’s richest countries. Even so, some major tax havens, including Ireland and some Caribbean nations, still have not signed on to the deal, potentially weakening the effectiveness of the Biden administration’s plan to quash the shifting of profits to low-tax countries.
A final accord would reshape global commerce and shore up finances that have deteriorated in numerous countries after more than a year of grappling with the pandemic. It could also end a brewing global trade war over the taxation of companies like Amazon, Google, Facebook and others that earn revenue online across the globe. The Trump and Biden administrations have threatened retaliatory tariffs as India, Britain, France and others have introduced taxes on digital services from American companies.
“Today marks an important step in moving the global economy forward to be more equitable for workers and middle-class families in the United States and around the world,” President Biden said in a statement.“With a global minimum tax in place, multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down and protect their profits at the expense of public revenue,” he said.
The blueprint was originally approved by Group of 7 nations
in June. Ministers from the Group of 20 major economies will hash out further details next week at a summit in Italy.The deal comes after four years of fraught international negotiations. If enacted, it would essentially stop countries from slashing their tax rates to lure businesses, a move that the United States and other high-tax jurisdictions say has deprived them of funding for crucial investments like infrastructure and education.
Critical details still need to be worked out, including how to execute the plan, which is expected to be finalized in October, the economic cooperation organization said. Those details could also determine which American multinationals are subject to the new rules on digital taxation, which exclude financial services companies and those in extractive industries like oil and gas. And after that, new digital taxes and global corporate minimum taxes would still need to be approved by Congress and national legislatures.
The organization estimates that over $100 billion of corporate profits would be reallocated from companies’ home countries to other markets where they operate. Large emerging markets like India are expected to reap a tax windfall, though a big chunk would also go to wealthy countries like France and Germany, which say they have been deprived of funding by countries that use lower taxes to attract an inordinate amount of tax revenue.
The agreement is a victory for the Biden administration, which reinvigorated the negotiations this year with a new proposal for a global minimum tax. But it also builds on groundwork laid by Treasury Department negotiators under President Donald J. Trump.
I offer this added thought:
International Arms Sales Tax
By international treaties, impose a 50% sales tax on all arms sales to other countries. The proceeds would go to the poverty abolition fund. If you have enough to kill some people, you have enough to help some others.