Corporate Tax

IMF chief praises US world corporate tax proposal

The IMF on Tuesday praised Washington’s proposal for a global minimum tax rate of 15 percent for businesses, saying it would free up more resources for governments to invest in areas such as education, health and infrastructure.

While there have been proposals to set the interest rate at 21 percent, “anything above or below today’s 10 (percent) in many places is an advantage,” said Kristalina Georgieva, executive director of the International Monetary Fund.

The Washington-based crisis lender has long been in favor of an agreement on a common global tax, she said in an interview with the Washington Post.

“Why? Because when we have it, there is no race to the bottom and less tax avoidance,” said Georgieva.

That means “more money in the public sector to invest in education and healthcare as well as in infrastructure and digitization – all the good things that we need to invest more in.”

However, it recognized the challenge of finding “the sweet spot” for the global economy between this idea and the best tax rate for national governments, as some countries relied on low tax rates to compete.

The member countries of the Organization for Economic Co-operation and Development (OECD) agreed in principle in 2015 to work on a plan to prevent companies from evading taxes by relocating their headquarters to low-tax countries. This process is known as ground erosion and profit shifting.

Years of negotiation made little headway, but discussions revived with the arrival of President Joe Biden at the White House.

Last week his government proposed to OECD partners a tax rate for multinational companies of at least 15 percent. This was the first time the US officially proposed a global minimum rate.

US Treasury Secretary Janet Yellen will attend the meeting of Treasury Ministers of the Group of Seven Advanced Nations in London next week, who are expected to support the 15 percent proposal.

Her deputy, Wally Adeyemo, told Reuters on Monday that he expected “a lot of unified support” for the plan from the G7 countries.

The story goes on

The largest economies in the euro area, Germany and France, have expressed support for the US plan.

The other topic that dominates the debate is how to deal with the taxation of big tech companies like Amazon, Apple, Google and Facebook.

The challenge is to ensure a “fair distribution” of taxes where profits are made and where businesses are, Georgieva said.

Dt / vmt / esp / hs / cs

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