Corporate tax havens require a global solution

President Joe Biden says he wants to partly roll back the Republican tax cuts of 2017, including corporate tax reductions that amounted to a giveaway to some of the world’s richest entities. Reversing those reckless cuts is the right goal but won’t solve the underlying problem: the use of offshore tax havens that allow corporations to skirt US taxes (as well as those of other countries) by funnelling their profits through subsidiaries in low- or no-tax jurisdictions.

So it’s encouraging that newly installed Treasury Secretary Janet Yellen is now pursuing an international agreement that would set a global minimum tax on multinational corporations. This would theoretically remove the incentive for American entities to set up shop in Bermuda or the Cayman Islands just to get around US taxes.

By some estimates, the US Treasury is missing out on close to $100 billion a year that corporations are sheltering in this manner. The non-binding agreement Yellen is pursuing with more than 140 countries through the Organisation for Economic Cooperation and Development would set a minimum corporate tax rate around the globe, at a yet-undetermined level. It’s a longshot, but if it works, it could reduce the opportunities for corporations to wriggle out of their tax obligations at home.