Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

World leaders are making progress on a huge global tax overhaul

World leaders are making progress on a huge global tax overhaul

For years, world leaders have been trying to launch a historic overhaul of global tax rules, aiming to tackle an unwieldy system rife with loopholes long exploited by big business. That goal may finally be in sight.

The Biden administration's decision to back a global minimum corporate tax rate while it pushes a massive $2 trillion infrastructure package in the United States has ignited hopes that a long-elusive agreement can be reached this summer.

"What we see this year is an acceleration in the process," Italian Finance Minister Daniele Franco told reporters following a meeting of G20 finance ministers and central bank governors on Wednesday. He said the group is working to come to an agreement by July.

Earlier this week, French Finance Minister Bruno Le Maire said "an agreement on international taxation is now within reach."

But experts question whether a deal between the roughly 140 countries participating in discussions led by the Organization for Economic Cooperation and Development would be strong enough to force multinational companies to pay more taxes.

"I don't know whether they're going to be able to pull it off," said Michael Moore, a professor of economics at George Washington University's Elliott School of International Affairs. "It's hard to do things like this."

Yellen changes course


Talks have gained fresh momentum after US Treasury Secretary Janet Yellen called for a global minimum corporate tax rate in a speech earlier this week, citing the need to avoid a "race to the bottom."

"Together, we can use global minimum tax to make sure that the global economy thrives, based on a more level playing field in the taxation of multinational corporations," Yellen told the Chicago Council on Global Affairs.

Establishing a minimum corporate tax to discourage companies from filing taxes in countries with the lowest rates has been a key pillar of OECD discussions.

Previously, the United States was lukewarm in advocating for such a policy shift. But Washington is strengthening its stance as it tries to rally support for raising corporate taxes at home to help pay for the renewal of American infrastructure.

President Joe Biden has proposed increasing the corporate tax rate in the United States to 28% from 21%, as well as setting a minimum tax of 21% on US companies' foreign earnings. That would help cover the cost of spending projects outlined in the American Jobs Plan, such as $621 billion on roads, bridges and public transit.

Yet the administration needs to ensure companies don't try to game the system, employing teams of lawyers that can figure out how to shelter profits in international tax havens. That's where a global agreement would come into play.

"It's part of a broader political campaign to get the tax component of the next piece of spending legislation enacted," said Gary Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics.

Countries including France and Germany have hailed the new US stance.

"The support of the United States of America is a very decisive push," German Finance Minister Olaf Scholz said at a press conference on Tuesday.

Ireland, which has successfully recruited global companies including big US tech firms by offering a corporate tax rate of just 12.5%, was more muted in its response, while expressing its commitment to ongoing discussions.

Can it work?


US support does not guarantee that negotiations will progress smoothly.

A minimum corporate tax rate around 21% would be well above the 12.5% figure that has been under discussion at the OECD level, said Elke Asen, a policy analyst at the Tax Foundation's Center for Global Tax Policy.

Countries also need to reach an agreement on the other main pillar of tax talks, which aims to address where companies book their profits. In a digital world, many countries argue that it makes sense for firms to be taxed where they generate income, instead of where they're based.

The United States has pushed back on such changes, which would require the government to cede potential revenue from large tech companies like Facebook (FB) and Amazon (AMZN) to other jurisdictions.

In the absence of an agreement, countries such as France and the United Kingdom have started introducing their own digital sales taxes, provoking retaliation and the threat of tariffs by Washington.

Hufbauer is also skeptical that efforts to develop an international minimum corporate tax will result in meaningful changes to the system. He predicts there will be a "symbolic" agreement, but that in practice, countries will keep offering tax breaks and subsidies to prop up national champions and bolster competitive industries, keeping their tax burdens depressed.

"If there's a global minimum rate and Canada thinks that's not right for them, they'll just invent a new credit or deduction," he said.

But after the discord of the Trump era, when America took a step back from the global stage, there's a real desire for countries to cooperate and show solidarity on thorny issues, according to Moore.

"The idea of at least superficial cooperation is very important because it was just so fraught for so long," he said. "I think they're going to make nice as long as possible."

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
The Country That Got Too Rich? Public Spending Dominates Norway Election
EU Proposes Phasing Out Russian Oil and Gas by End of 2027 to End Energy Dependence
×