The Washington Post

A tax worth fighting for

Mr. Biden’s bid for a global 15 percent corporate tax rate is worth the effort.

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LEADERS OF the Group of Seven leading industrial nations convene in Cornwall, England, Friday, with their respective finance ministers having already made a significan­t agreement to change the way countries tax corporate profits. The United States, Britain, France, Germany, Italy, Japan and Canada converged on a minimum tax rate of 15 percent for multinatio­nal corporatio­ns, which, they maintain, will end the “race to the bottom” that has forced countries to slash corporate rates lest companies flee to low-rate tax havens such as Ireland or Bermuda.

The Biden administra­tion secured the deal with a concession that enables European countries to tax some profits that a handful of large multinatio­nals, including U.s.-based tech companies, earn on sales within their markets; this reversed a position the Trump administra­tion had taken based on “America First” ideology and enforced with retaliator­y tariffs. The new U.S. stance reflects not only a welcome return to multilater­al coordinati­on but also a sensible assessment that a level playing field in global corporate taxation would promote efficiency and equity. Especially in the wake of the pandemic, the world needs more resources to support public services and less shuffling of income among shell companies.

Republican­s in Congress may have the power to undo some or all of the new plan to the extent it requires changes to U.S. law or to internatio­nal tax treaties, the latter of which are subject to twothirds votes in the evenly divided Senate. GOP senators have voiced objections, as they do to many proposals that clash with anti-tax ideology. There is some weight to one of the critics’ points: A global minimum tax is more easily declared than enacted, and more easily enacted than enforced. The G-7 agreement’s practical impact won’t be known until the 139 countries involved in global negotiatio­ns actually comply. Consent from China, Russia and India, among other large economies, is still pending. Ireland — deeply committed to an economic model built on a 12.5 percent corporate rate — is reluctant to go along. But the G-7 deal would allow the home countries of multi

nationals to thwart holdouts by collecting the difference between a haven’s tax rate and the global minimum.

To be sure, no one should assume that a global 15 percent minimum would trigger an immediate flood of new revenue from corporate taxation. Analysts at the University of California at Berkeley and the University of Copenhagen have estimated that multinatio­nals shifted $700 billion worth of profits to tax havens in 2017. Taxing all $700 billion at 15 percent would yield $105 billion — which in turn would be spread out among various nations.

Still, the benefits would accrue over

time and could be considerab­le: deterring tax avoidance, preventing further erosion of tax bases around the world and providing government­s with more predictabl­e revenue streams extracted more progressiv­ely. Though neither particular­ly revolution­ary nor particular­ly easy to accomplish, a 15 percent global minimum tax would increase the legitimacy, actual and perceived, of corporate taxation. It is therefore a worthwhile goal, on which President Biden and Treasury Secretary Janet Yellen have rightly staked American prestige and spent American political capital. They may have to spend a lot more of both before it becomes a reality.

 ?? POOL/REUTERS ?? Treasury Secretary Janet Yellen speaks in London on June 5 after attending the Group of Seven finance ministers meeting.
POOL/REUTERS Treasury Secretary Janet Yellen speaks in London on June 5 after attending the Group of Seven finance ministers meeting.

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