Finance ministers from the world’s most developed economies said Wednesday they had hoped to negotiate a revision of the taxation of multinationals as well as a minimum tax rate by the end of the year.
Longstanding multilateral talks on the issue were kicked off this week when Treasury Secretary Janet Yellen signaled her support for the idea of a global minimum tax rate that would help end the “30 year race to the bottom” in corporate taxation.
The draft international agreement on the matter was released by the Organization for Economic Co-operation and Development last October, but the Trump administration had by then decided to pull out of longstanding multilateral negotiations.
According to the Financial Times, the US also presented its own proposal this week to tax the world’s largest multinational corporations, similar to the proposals made by the OECD.
With the current proposals, regardless of the nature of their business, large multinational corporations would be partially taxed at the national level, in proportion to the revenues they generate from their respective markets.
The US government, which plans to increase the tax rate from 21% to 28% over the years, is aiming for a global minimum rate of 21%, although the OECD has suggested it could be closer to 15%.
Read: The chances for a global corporate tax deal improve as Yellen signs her Memorandum of Understanding
The outlook: Corporate taxes are another important area in which the US, rejoining a multilateral forum, is helping to kickstart stalled negotiations. Obstacles remain on the path to an agreement, but the prospect of renewed trade and tax wars in the global economy after the pandemic – at a price the OECD estimates at 1% of global gross domestic product – could help keep the minds focused.
Since unanimity is required for any deal, low-tax countries like Ireland (where the corporate tax rate of 12.5% is seen by all political parties as a symbol of national sovereignty) should vigorously fight their corner.