President Biden and other world leaders are on the verge of an extraordinary deal that could stem the madness –“And so far apparently unsolvable -“ Corporate tax evasion problem. Success would mean hundreds of billions of dollars in new revenue to repair crumbling infrastructure, cure the sick, and improve schools from Massachusetts to Mumbai.
But the president cannot accomplish the American end of the deal alone. He will need the help of Congress if the most powerful country in the world is to do its part to bring a measure of justice to an unjust system.
For decades, jurisdictions from Ireland to Bermuda have been committed to what US Treasury Secretary Janet L. Yellen has called a “Race Down” to corporation tax –“To bring prices down, to attract some of the largest companies in the world. American companies like Apple and Nike have taken full advantage – “ Storing billions of offshore budgets, slashing their tax bills, and effectively shifting the burden of funding government services onto a struggling middle class.
For a long time, a global solution to this problem seemed unattainable. But an effort overseen by the Paris-based Organization for Economic Co-operation and Development has made remarkable strides toward a multilateral deal in recent years – “just to see the effort amid the pandemic and the insistence of Trump -Administration stalled on a provision that would have favored American companies ”.
The Biden government revived talks after taking office. And earlier this month, 130 nations, representing more than 90 percent of the world’s GDP, signed up.
The agreement has two main pillars. It would create an almost universal minimum corporate tax of 15 percent that is supposed to dampen the motivation for businesses to look for low rates. And it would impose a separate levy on the world’s largest companies – “Companies like Facebook and Amazon have to pay taxes when they sell goods and services, even if they are not physically present there.
The pact that has yet to be concluded would be more than a diplomatic victory. It would be a triumph of the imagination.
Jeffrey Winters, a political scientist at Northwestern University who studies business elites, says there has long been a feeling that globalization is one “Impersonal force of nature” The “Nobody controls” and that big, wealthy gamblers will inevitably play the system. But the new agreement he mentions “a breakthrough,” is a striking statement that the international community can actually exercise control.
However, as Winters and other observers argue, the pact is only a beginning. The minimum of 15 percent corporate tax is actually quite low. It is a floor. And the contracting parties can and should pursue higher goals.
Gabriel Zucman, a University of California at Berkeley economist known for his groundbreaking work on inequality, has called on Congress to approve a 25 percent levy that could inspire other nations to follow suit. “Replace a race down with a sprint up.”
* Guest Editorial Excerpt from The Boston Globe.
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