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130 countries sign on to global minimum tax plan, creating momentum for Biden push

The White House believes countries need to move together to prevent firms from taking advantage of weak tax rules

By David J. Lynch
July 1, 2021 at 6:12 p.m. GMT+1
https://www.washingtonpost.com/us-policy/2021/07/01/global-corporate-tax-oecd/

The Biden administration claimed an important victory on Thursday in its drive for a global minimum corporate tax with an announcement from Paris that 130 countries had signed on to the plan.

The Organization for Economic Co-operation and Development (OECD) made the announcement, which includes an agreement on taxing the American giants of the Internet economy, such as Google, Facebook and Amazon.

“Multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down and protect their profits at the expense of public revenue,” President Biden said. “They will no longer be able to avoid paying their fair share by hiding profits generated in the United States, or any other country, in lower-tax jurisdictions. This will level the playing field and make America more competitive.”

Treasury Secretary Janet L. Yellen called the agreement “a historic day for economic diplomacy” and said it represented one of the administration’s core foreign policy goals.

“For decades, the United States has participated in a self-defeating international tax competition, lowering our corporate tax rates only to watch other nations lower theirs in response. The result was a global race to the bottom,” she wrote on Twitter. “ … Today’s agreement by 130 countries representing more than 90% of global GDP is a clear sign: the race to the bottom is one step closer to coming to an end.”

Still, a great deal of work remains before a global minimum tax will become a reality. Each of the 130 nations, including the United States, must convert its endorsement of today’s five-page plan into the nitty-gritty detail of legislation that will rewrite its tax code.

The OECD statement said the two-pronged accord would reallocate the right to tax $100 billion in digital companies’ profits from their home nations to countries where they earn money even if they lack a physical presence there. The deal also sets a minimum corporate profits tax of “at least 15 percent,” which is expected to raise $150 billion annually, according to the OECD.

“This historic package will ensure that large multinational companies pay their fair share of tax everywhere,” OECD Secretary General Mathias Cormann said. “This package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it. It also accommodates the various interests across the negotiating table, including those of small economies and developing jurisdictions. It is in everyone’s interest that we reach a final agreement among all Inclusive Framework Members as scheduled later this year.”

The global minimum tax is an essential element of the president’s plan to raise the corporate tax rate at home. But early reaction from some prominent Republicans to the OECD statement was sharply negative.

“This is a dangerous economic surrender that sends U.S. jobs overseas, undermines our economy, and strips away our U.S. tax base," said Rep. Kevin Brady of Texas, the senior Republican on the tax-writing House Ways and Means Committee.


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By David J. Lynch
David J. Lynch is a staff writer on the financial desk who joined The Washington Post in November 2017 after working for the Financial Times, Bloomberg News and USA Today. Twitter
https://www.washingtonpost.com/us-policy/2021/07/01/global-corporate-tax-oecd/