- The White House stressed Friday that its offer for a global minimum corporate tax is more than just a talking point for the world’s economists.
- Biden advisor Daleep Singh told CNBC that efforts to get allies to adopt a minimum tax were motivated by both economic and national security factors.
- “It’s not just a tax issue. It’s about: How do we fund initiatives that we believe are central to our domestic renewal?” he said.
The White House stressed Friday that its efforts to introduce a global minimum corporate tax rate are a top priority for President Joe Biden and are more than just a topic of conversation for economists around the world.
Daleep Singh, who serves both as deputy national security advisor and deputy director of the National Economic Council, told CNBC that efforts to get allies to adopt a minimum tax were motivated by both economic and national security factors.
“It’s not just a tax issue. It’s about: How do we fund initiatives that we believe are central to our domestic renewal?” he said.
Singh stated that the Association for Economic Co-operation and Development behind the minimum tax would give all members a chance to compete based solely on their ability to promote innovation and the ingenuity of their respective workforce.
The US Treasury Department has taken the lead in convincing today’s nations to adopt a global minimum tax. The ministry announced its 15% target on Thursday, saying it was encouraged by the early talks with foreign officials last week.
A global minimum tax would also allow governments to generate better revenue for domestic projects that the Biden government considers important to national security, Singh said.
“Our national security strategy is based on renewal at home. The kind of challenges I described earlier – the inequality we observe, the tremendous importance of addressing an existential climate crisis, people leaving the world of work – the government needs to play ”a more active role in addressing these challenges. “
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The Treasury Department quickly realized that the 15% suggestion, which is below what some were forecasting, should be viewed as some sort of lower limit, and that later discussions could eventually push it up.
As head of the department, Secretary of State Janet Yellen has repeatedly stressed the importance of stopping an international “race to the bottom” on global corporate tax rates. If a coalition of countries approves the 15% rate, it could help governments generate revenue and prevent certain jurisdictions from monopolizing the business creation market.
Countries with lower corporate rates, such as Ireland at 12.5%, have historically expressed doubts about efforts to gain support for a unified approach. Even a few defectors from the plan could jeopardize the initiative by setting lower tariffs and effectively encouraging companies to relocate there.
According to a study by the Tax Foundation 2020, the average peak rate among OECD countries is 23.5%.
Nonetheless, advocates of a global minimum argue that some countries routinely entice companies with much looser tax systems through various tax breaks and incentives.
When asked how the government intends to convince low-tax countries to agree to Washington’s plans, Singh and his colleagues stressed the importance of a level playing field in tax policy.
“We are very clear: companies compete for too long on the basis of [countries’] Tax rates. It’s a destructive race to the bottom that leaves everyone worse off. Especially employees who generate an ever increasing share of our tax revenue, ”he said.
“Our proposal is therefore to agree on a minimum tax rate for companies around the world. And then we compete for our ability to innovate, the dynamism of our workforce and our technological edge, ”added Singh.
Because of this, the Biden government may have opted for a flexible yardstick: low enough not to scare skeptical countries, but open to future changes.
The phrase “corresponds to the minimum tax for highly profitable companies proposed by the Biden administration, so 15% is the lowest level of corporate tax Biden believes when all deductions are fully taken into account,” Raymond James analyst Ed Mills told CNBC in an E -Mail on Thursday evening.
“This is less than the 19% proposed by President Obama and recognizes that even 15% will be a tough task,” he added.
The Biden administration is in the midst of violent negations at home, particularly about two massive laws that would fundamentally reshape parts of the US economy.
The infrastructure-heavy American employment plan would invest several hundred billion dollars in rebuilding the hard infrastructure, but also to finance scientific innovations, pay for household help and build around 500,000 charging stations for electric vehicles.
Its parallel proposal, the American Families Plan, would provide $ 1.8 trillion to fund social programs that include paid family vacations and a free community college.
The White House hopes to fund much of that expense through its Made In America tax plan, a major overhaul of tax law aimed at expanding the IRS to combat tax evasion and strengthening the basis for valuation of inherited capital put an end to profits and introduce the global minimum tax.
The Biden team has also proposed raising the U.S. corporate rate to 25-28%. He wants households that earn more than $ 1 million a year to pay more for capital gains and close the loopholes of borne interest.