Herald on Sunday

Biden sells G7 on global tax

But US Congress a hurdle for president on the home front


President Joe Biden might have persuaded some of the world’s largest economies to hike taxes on corporatio­ns, but the US Congress could be a far tougher sell.

White House press secretary Jen Psaki said yesterday that leaders of the Group of Seven — which also includes the United Kingdom, France, Canada, Germany, Italy and Japan — agreed with Biden on placing a global minimum tax of at least 15 per cent on large companies. The G7 leaders, participat­ing in a three-day summit in England, affirmed their finance ministers who earlier this month endorsed the global tax minimum.

“America is rallying the world to make big multinatio­nal corporatio­ns pay their fair share so we can invest in our middle class at home,” Jake Sullivan, the president’s national security adviser, said yesterday on Twitter.

A minimum tax is supposed to halt an internatio­nal race to the bottom for corporate taxation that has led multinatio­nal businesses to book their profits in countries with low tax rates. This enables them to avoid taxes and encourages countries to slash rates. The minimum rate would make it tougher for companies to avoid taxes, and could possibly supplant a digital services tax that many European nations are imposing on US tech firms that pay at low rates.

Biden administra­tion officials believe the use of overseas tax havens has discourage­d companies from investing domestical­ly, at a cost to the US middle class. The president hopes a G7 endorsemen­t can serve as a springboar­d for getting buy-in from the larger Group of 20 complement of nations.

The agreement is not a finished deal, as the terms would need to be agreed upon by countries in the Organisati­on for Economic Cooperatio­n and Developmen­t and implemente­d by each of them. The president needs other countries to back a global minimum tax to ensure his own plans for an enhanced one in the US don’t hurt American businesses.

“It has the potential to stop the race to the bottom,” said Thornton Matheson, a senior fellow at the Tax Policy Center.

“It would be a huge sea change in the way things have been going in corporate taxes for the last three decades.”

The idea of an enhanced global minimum tax is also an integral part of Biden’s domestic agenda, but it faces resistance in Congress.

The president has proposed using a global minimum tax to help fund his sweeping infrastruc­ture plan. His budget proposal estimates it could raise nearly US$534 billion ($749.27b) over 10 years, but Republican­s say the tax code changes would make the United States less competitiv­e in a global economy.

Treasury Secretary Janet Yellen has framed the agreement as a matter of basic fairness after the finance ministers’ meeting.

“We need to have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises and ensure that all citizens and corporatio­ns fairly share the burden of financing government,” she said.

Texas Rep. Kevin Brady, top Republican on the House Ways and Means Committee, said GOP lawmakers would fight “tooth and

nail” against the tax. Republican­s view lower taxes as encouragin­g companies to invest and hire, putting little stock in Biden’s argument that better infrastruc­ture and worker education would boost growth.

Senate Republican Leader Mitch McConnell of Kentucky has repeatedly said his party will oppose any measures that undo the 2017 tax cuts signed into law by former president Donald Trump.

 ??  ??
 ?? Photo / AP ?? Joe and Jill Biden greet Boris and Carrie Johnson at G7.
Photo / AP Joe and Jill Biden greet Boris and Carrie Johnson at G7.

Newspapers in English

Newspapers from New Zealand