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“The Group of Seven wealthy democracies agreed Saturday to support a global minimum corporate tax of at least 15%... The [agreement would also let] countries tax a share of the profits earned by companies that have no physical presence but have substantial sales, for instance through selling digital advertising.” AP News
The right opposes the agreement, arguing that it will harm US tech firms and undermine US sovereignty.
“Mr. Biden hopes to fund his domestic spending blowout by milking American companies for more revenue, and he’s figured out his tax increases will undermine American competitiveness unless other governments go along. That strategy already is failing now that Ms. Yellen could secure agreement only to a 15% rate, rather than the 21% she first sought…
“Ms. Yellen also had to agree to a digital tax aimed primarily at U.S. tech companies. The tech tax is a startling surrender for a Treasury Secretary. Ms. Yellen appears to have acquiesced to European demands that the tax be tailored so narrowly that it would apply primarily to U.S. digital companies and not large European manufacturers. In doing so, she’s surrendering Washington’s ability to tax American companies as Congress sees fit…
“One country that almost certainly will not sign up for this is China. Beijing refuses to be drawn into these negotiations because it wants to retain control over its tax policy as a tool to encourage more investment. Chinese officials must be chuckling over their tea as they read the G-7 communiqué.”
Editorial Board, Wall Street Journal
“If an agreement is reached through the OECD, the administration is likely to enact it as a ‘multilateral instrument,’ somewhat akin to the Paris Climate Accord, and avoid submitting it to the Senate as a tax treaty… This approach would transfer significant national sovereignty over corporate taxation, key to overall economic policy, to some yet-to-be-defined international regime under the guidance of the OECD, an unelected multilateral institution…
“We need to know how far this transfer of authority would extend and what institution or process would handle disputes and enforcement. Would the negotiated rules be incorporated automatically into the tax laws of signatories, much like EU rules have immediate force of law in member states? If Arizona wants to give tax abatements to a domestic or foreign semiconductor firm to build a fabrication plant, would it have to get the approval of OECD experts? Would other nations have a way of challenging such tax incentives?”
Thomas J. Duesterberg, Wall Street Journal
“Rather than having to respond to competitive pressure being applied by neighbors or up-and-coming business destinations, [the US and UK] are taking steps to make sure their competition is stilted. It is in their national interest to prevent other countries from offering a more competitive rate — but not obviously in the interest of employees or consumers (who see the cost of corporation tax reflected in their wages and costs)…
“It is not just the policy, but what it represents, that is the real cause for concern. The world’s richest countries are in the process of undercutting economic principles — mainly competition and the ability to attract business — that have been responsible for increasing people’s prosperity across the globe. It’s easy to see why they’ve done it: the short-term gain may well be to their advantage. But the long-term economic consequences could be harder to avoid — even for those at the top.”
Kate Andrews, Spectator USA
“Here’s the rub. Not all multinational corporations have a profit margin of over 10 percent. Amazon, for example, had a profit margin of 6.3 percent of its $386 billion global profits in 2020. In other words, it is not going to be caught by this tax at all. Many other companies who do currently have profit margins above 10 percent will presumably already be thinking up ways of engineering margins below this threshold. It is astonishing that the world, or part of the world at any rate, can sit down to work out a tax reform designed to trap what many consider to be industrial scale tax-avoidance by tech giants — and end up exempting at least one of those tech giants.”
Ross Clark, Spectator USA
The left supports the agreement, arguing that global cooperation is necessary to prevent tax evasion by multinational corporations.
The left supports the agreement, arguing that global cooperation is necessary to prevent tax evasion by multinational corporations.
“Last week the Guardian reported that an Irish subsidiary of the US tech giant Microsoft paid no corporation tax at all last year, on profits of $315bn (£222bn). This is because Microsoft Round Island One, which collects licence fees for Microsoft software, is ‘resident’ for tax purposes in Bermuda. Since Bermuda does not levy corporation tax, the only payout came in the form of bumper dividends for Microsoft shareholders, worth a total of $55bn. Over recent decades, such shameless chicanery has become the way of the world. But at the weekend, G7 finance ministers took a first step towards dismantling this footloose, beggar-thy-neighbour version of capitalism, which has deprived treasuries of hundreds of billions of pounds in tax receipts…
“The 15% minimum is not much above the low corporation tax rates currently set in countries such as Ireland and Switzerland, and falls a long way short of the 21% rate first pressed for by Joe Biden, the US president. Nevertheless, an important principle of cooperation between states has been established, restoring a sense of political control over the manoeuvres of the global business elite.”
Editorial Board, The Guardian
“Historically, governments have always been several steps behind corporations as those corporations have expanded their scope. In the U.S., the railroads were the first corporations to expand beyond a single state’s borders in the years following the Civil War, amassing levels of wealth and power that dwarfed those of state governments, which the railroads frequently purchased and controlled. It was not until the 1890s that movements arose that tried to corral corporate power on a level commensurate with the corporations—that is, on the national level. It was not until the 1930s, when the New Deal was created, that national government finally rose to that challenge, however partially and imperfectly…
“It’s now nearly half a century since multinational and then global corporations arose, eroding the capacity of national governments to set or defend the social democratic accords on wages, taxes, and regulations that they’d enacted between the 1930s and the 1970s. In a tepid and half-hearted way, the European Union has created numerous cross-border regulations over the past few decades, but nothing remotely so ambitious as a minimum tax, much less a global one… Biden’s proposal signals that it may finally be time for the world’s governments to play catch-up—and not a moment too soon.”
Harold Meyerson, American Prospect
“Between 1985 and 2020, the average corporate tax rate across major economies fell from 49 percent to about 23 percent as countries tried to spur more investment at home and make themselves more appealing destinations for big multinationals looking for lighter levies…
“When the Trump administration cut the top U.S. corporate rate from 35 percent to 21 percent in 2017, it imposed a few measures meant to discourage tax-haven abuse. They included a somewhat weak minimum tax on overseas profits known as the GILTI, which was designed to eventually max out at about 13 percent, and was mostly aimed at profits from intellectual property. The results haven’t been impressive so far. In 2019, U.S. multinationals still booked 61 percent of their post-tax profits in the seven biggest tax havens… The Biden approach is vastly more aggressive, and uses America’s enormous economic sway to force global change…
“One reason to be optimistic about this plan is that the United States does not need every country in the world to go along with its idea for a global minimum tax to be effected… just 10 countries are home to the companies that generate about 80 percent of profits from multinationals. If only [a] handful followed the U.S.’s lead, it would make a major difference.”
Jordan Weissmann, Slate
A libertarian's take
“Ireland dragged itself from poverty by making itself a relatively welcoming place in which to do business. No wonder Paschal Donohoe, the country's finance minister, told global minimum tax fans to pound sand. He says that Ireland will keep its 12.5 percent rate for the foreseeable future. Other countries saw Ireland's success and emulated it with low tax rates of their own. That's especially true in Eastern European countries that had to hustle to catch up with market-oriented economies after the collapse of Soviet bloc socialism. They, too, are unimpressed by tax cartel schemes…
“If the U.S. and other Group of Seven governments set a minimum tax without buy-in from the likes of Hungary and Ireland, they risk making those low-tax countries more competitive than ever. And those countries have little incentive to join the rush to a tax cartel since they built their prosperity with environments including low rates. So, White House National Security Advisor Jake Sullivan may be a little premature when he boasts that ‘[t]he world is closer than ever before to a global minimum tax.’ That's true only if you define the world as developed economies that don't feel a need to offer attractive environments but would rather sit back and milk the herd.”
J.D. Tuccille, Reason
