Corporate Tax

The US gives a brand new plan for world corporate tax talks

The Biden government has proposed a new model for the taxation of multinational corporations, requiring the world’s largest corporations to pay taxes to national governments based on their sales in each country under a global minimum tax agreement.

In documents sent to the 135 countries negotiating international taxes at the OECD in Paris and received by the Financial Times on Wednesday, the U.S. Treasury Department put forward a plan designed for global profits for the largest corporations, including large US technology companies should apply. regardless of their physical presence in a particular country.

The aim of the plan is to catalyze negotiations at the OECD, the international organization of rich countries, with the promise of a more stable international tax system that would stop the proliferation of national digital taxes and break the form of tax avoidance and profit shifting by many multinational corporations.

The US concession during the week of the IMF and World Bank Spring Meetings comes as the White House called for US corporate taxes to be increased by about $ 2.5 billion over the next 15 years, to more than $ 2 billion invest in infrastructure, clean energy and energy manufacturing investments.

After nearly a decade, the OECD tax negotiations were split into two parts. The first pillar is intended to define a new tax system for the largest multinational companies, while the second pillar is intended to address the global minimum tax rate, which the US is aiming for at 21 percent.

An agreement with the OECD would allow Joe Biden’s administration to increase corporate taxes on US companies without fear of being undercut by other countries, as this would include a widespread global minimum tax rate.

If the US plan is accepted, other countries could increase the revenues of large US tech companies and other multinationals that operated in their territory but paid little corporate tax.

The Washington offer reflects Biden’s overall goal of ending what officials have termed a global tax race that deprived governments of the revenues needed to fund basic services and investments.

International tax negotiations at the OECD have stalled for years because the US has objected to attempts by other countries to reach agreements that discriminate against US multinational corporations, especially large US technology companies.

The Trump administration had insisted on a “Safe Harbor” rule that would make compliance by US tech companies voluntary. Shortly after taking office that year, Biden dropped that demand, but this week’s proposal offers a new solution.

The US Treasury Department is now offering a different formula that only the largest and most profitable companies in the world, regardless of their industry, would be subject to the new rules, based on their sales and profit margins. That probably includes around 100 companies, including the big US tech companies as well as other extremely large multinational corporations.

The proposals have already been passed on to the OECD, which is calling the negotiations and trying to bring the countries together to outline a global deal by the summer.

Pascal Saint-Amans, Head of Tax Administration at the OECD, welcomed the US proposals. “This is restarting negotiations and is very positive,” he said. “It’s a serious proposal with a chance to be successful in both areas [international negotiations] and US Congress. Peace is more important than anything and this would stabilize that [international corporate tax] System in the post-coronavirus environment. “

Saint-Amans added that the proposal would likely generate as much revenue for other countries as the OECD proposal, while also allowing the US to raise the money its largest companies want.

Many international tax fighters said the OECD proposals did not go far enough or did not give emerging economies sufficient power to raise taxes. The US proposals do not materially change this characteristic, although the US documents indicate that the US is willing to be flexible on some details.

An agreement would help resolve the transatlantic trade dispute between the US and several countries that have introduced taxes on digital services instead of a broader multilateral agreement.

Washington has threatened to impose tariffs on countries like France, the UK, Italy and Spain on the digital taxes payable by US tech companies, as the taxes unfairly discriminate against US companies.

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