The Biden administration proposes a new model for taxing multinational corporations, calling on the world’s largest companies to tax governments based on sales in each country as part of a global minimum tax arrangement. I am.
In a document sent to 135 countries negotiating international taxation in Paris’ OECD and obtained by the Financial Times on Wednesday, the U.S. Treasury is the world’s largest company, including a major U.S. technology group. Shown the plans that apply to profits. Regardless of their physical presence in a particular country.
The goal of this plan is to facilitate negotiations in the OECD, the international organization of wealthy countries, to prevent the spread of national digital taxes, and to ensure a more stable international tax system that breaks the pattern of tax avoidance and profit transfer. is. By many multinationals.
US concessions come during the week of the IMF and World Bank spring meeting as the White House calls for a hike US corporate tax It will increase by approximately $ 2.5 trillion over the next 15 years to pay more than $ 2 trillion in investment in infrastructure, clean energy and manufacturing.
Almost 10 years later, OECD tax negotiations split into two parts. The first pillar is designed to set up a new system for taxing the largest multinationals, and the second pillar corresponds to the US minimum tax rate of 21% in the world. It is designed.
The OECD agreement allows the Joe Biden administration to raise corporate taxes on US companies without fear of tax cuts from other countries, including the widely applied global minimum tax rate.
Summary of US Proposal
The US proposal was designed by Treasury Secretary Janet Yellen’s team to meet fundamental opposition to the existing international corporate tax system in the United States and other major economies, but designed a new system from scratch. There was nothing to do.
The United States is most interested in ensuring the lowest effective corporate tax rate in the world. This allows you to raise money from the largest and most profitable companies without fear of profits or moving your headquarters elsewhere.
It removes all the benefits of low tax countries such as tax havens and Ireland to secure their business, not for basic business reasons, but purely for low tax rates. If they continue to apply low interest rates, the United States and other countries will be able to replenish corporate tax payments to the world’s lowest levels.
The proposal will also give all countries a new right to tax elements of global profits generated by the world’s largest multinationals, based on their share of sales. It aims to ensure that countries reassure their citizens that the largest global companies cannot do business in their own country without paying taxes.
This factor disappoints campaign participants who want to share all their income and shift the entire international corporate tax system to a global base, as the slice of global profits distributed around the world is so small. Let me do it.
Washington threatens countries such as France, the United Kingdom, Italy and Spain to apply tariffs on digital taxes that U.S. high-tech companies are required to pay because they unfairly discriminate against U.S. companies. ing.
If the US plan is accepted, other countries will be able to increase revenues from major US technology groups and other multinationals operating in their jurisdictions but paying very little corporate tax. ..
The proposal received strong support Thursday morning from Italian Prime Minister Mario Draghi, who will also chair the G20 this year. Draghi supported the US proposal to unblock negotiations, saying it was “totally late.” [the US] Demand a global minimum corporate tax. ”
As one of the countries that have introduced digital taxes, Italy’s support for US proposals will be important in ensuring broader consensus.
Spain’s Deputy Prime Minister Nadia Calviño told Bloomberg Television that Washington’s return to the negotiating table is very encouraging and we look forward to an agreement in the summer. .. However, she added that the details of the “very important” proposal still need to be considered.
Washington’s offer is Biden’s broader to end what the authorities said as a race to the bottom of global taxation that robbed the government of the income needed to fund basic services and investments. It reflects the goal.
Negotiations on international taxation have been stalled in the OECD for many years as the United States opposes other countries’ attempts to enter into agreements that discriminate against US multinationals, especially the largest tech companies in the United States.
The Trump administration has insisted on a “safe harbor” clause that makes compliance by US technology groups voluntary. Shortly after taking office this year, Biden withdrew its demand, but this week’s proposal offers a new solution.
The US Treasury now offers a different approach, based on revenue levels and profit margins, where only the world’s largest and most profitable companies, regardless of sector, are subject to the new rules. These probably include about 100 companies, including a major US technology group and other very large multinationals.
The proposal has already been shared with the OECD, which is convening negotiations and trying to bring countries together to outline global transactions by the summer.
Pascal Saint-Amans, OECD Head of Tax Administration, welcomed the US proposal. “This has restarted the negotiations and is very positive,” he said. “This is a serious proposal with a chance to succeed in both. [international negotiations] And the US Congress.Peace is of utmost importance and this will be stable [international corporate tax] The system in the post-coronavirus environment. “
San Amance added that the proposal is likely to bring as much revenue to other countries as the OECD’s own proposal, while at the same time allowing the United States to raise the desired funding from the largest companies. ..
Many international tax activists have stated that the OECD proposal is either underdeveloped or does not give emerging economies sufficient tax increases. The US documentation suggests that the US is prepared to respond flexibly to some details, but the US proposal does not significantly change this feature.
The agreement will help resolve the Atlantic slave trade dispute between the United States and some countries that have implemented digital service taxes on behalf of the broader multilateral agreement.
Additional report by Daniel Dombey
U.S. Offers New Plans in Global Corporate Tax Negotiations
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