Proposed by the US Treasury, backed by the IMF and applauded by countries like Germany and France, the prospect of a global minimum corporate income tax is gaining momentum.
This initiative, which aims to end competition for low taxes between countries and the use of tax havens by companies, will be on the agenda of the G20 finance ministers when they meet virtually on Wednesday, and the group could unveil a proposal in July.
The idea has been promoted by the Organization for Economic Cooperation and Development (OECD), but received a new impetus this week when the Secretary of the Treasury of the United States, Janet Yellen, assured that she would seek an agreement in the G20.
“Together we can use this global minimum tax to ensure that the economy thrives on the basis of a more level playing field for multinational companies,” Yellen said Monday.
This tax harmonization, aimed at imposing a minimum tax on companies regardless of the country where they are located, would seek to prevent companies from avoiding taxes by establishing headquarters in countries with lower rates, a frequent practice among technology firms that drains resources from the coffers. governmental.
– “Big step forward” –
The United States lowered its corporate tax rate in 2017 during the administration of former Republican President Donald Trump. But his successor, Democrat Joe Biden, last week proposed raising the rate again to fund a massive $ 2 trillion infrastructure and jobs plan.
However, Yellen has said it would be better to couple a US rate increase with a global minimum tax to end the “race to the bottom” between countries to see who implements the lower rate.
Washington’s European allies welcomed the US initiative.
“A global agreement on international taxation is now within our grasp,” French Economy Minister Bruno Le Maire told AFP on Tuesday, calling on countries “to seize this historic opportunity.”
German Finance Minister Olaf Scholz called Yellen’s announcement a “big step forward” in the battle to stop the erosion of government revenue.
“The support of the United States gives this initiative a strong tailwind,” Scholz said, adding that he hoped an agreement could be reached this year.
The European Commission spoke in the same vein, expecting “a consensual global solution” for the boreal summer. Its spokesman, Daniel Ferrie, said the bloc asked “all global partners to continue participating in these discussions and to continue working without delay.”
– How high? –
The International Monetary Fund joined the voices of support on Tuesday. “We are very much in favor of a global minimum tax on corporate income,” said Gita Gopinath, chief economist at the multilateral organization.
Speaking at a press conference at the beginning of the spring IMF and World Bank meetings, Gopinath noted that governments face “a great deal” of tax evasion and money transferred to tax havens.
He indicated that this is a matter of “great concern” for the IMF because it “reduces the tax base on which governments can collect revenue and spend on social and economic needs.”
The international reform would have two components: the minimum tax rate and the establishment of a system to modulate corporate taxes based on profits in each country, regardless of where companies are based, which would probably affect the tech giants the most.
No rate has been decided, but estimates range from 12.5% to 21%.