San Francisco Chronicle - (Sunday)
Plan to overhaul global tax system wins key backing
Top finance officials representing most of the world’s economy have backed a sweeping revision of international taxation that includes a 15% global minimum corporate levy to deter big companies from resorting to lowrate tax havens.
Finance ministers from the Group of 20 countries endorsed the plan at a meeting Saturday in Venice.
U.S. Treasury Secretary Janet Yellen said the proposal would end a “selfdefeating international tax competition” in which countries have for years lowered their rates to attract companies. She said that had been “a race that nobody has won. What it has done instead is to deprive us of the resources we need to invest in our people, our workforces, our infrastructure.”
The next steps include more work on key details at the Parisbased Organization for Economic Cooperation and Development and then a final decision at the Group of 20 meeting of presidents and prime ministers on Oct. 3031 in Rome. Italy hosted the finance minister’s meeting in Venice because it holds the rotating chair of the G20, which makes up more than 80% of the world economy.
Implementation, expected as early as 2023, would depend on action at the national level. Countries would enact the minimum tax requirement into their own laws. Other parts could require a formal treaty.
The U.S. already has a minimum tax on overseas earnings, but President Biden has proposed roughly doubling the rate to 21%, which would more than comply with the proposed global minimum. Raising the rate is part of a broader proposal to fund Biden’s jobs and infrastructure plan by raising the domestic corporate tax rate to 28% from 21%.
Yellen said she was “very optimistic” that Biden’s infrastructure and tax legislation “will include what we need for the United States to come into compliance” with the minimum tax proposal.
But Republicans in the Congress have expressed opposition to the measure. Rep. Kevin Brady of Texas, the top Republican on the taxwriting Ways and Means Committee, has blasted the deal, saying, “This is an economic surrender to China, Europe and the world that Congress will reject.”
The international tax proposal aims to deter the world’s biggest firms from using accounting and legal schemes to shift their profits to countries where little or no tax is due — and where the company may do little or no actual business. Under the minimum, companies that escape taxes abroad would pay them at home.