It’s rare to get any good news these days, but there is some this morning (Washington Post):
ROME — President Biden and the other national leaders gathered for the Group of 20 summit formally endorsed a new global minimum tax on Saturday, capping months of negotiations over the groundbreaking tax accord.
The new global minimum tax of 15 percent aims to reverse the decades-long decline in tax rates on corporations across the world, a trend experts say has deprived governments of revenue to fund social spending programs. The deal is a key achievement for Treasury Secretary Janet Yellen, who made an international floor on corporate taxes among the top priorities of her tenure and pushed forcefully for swift action on a deal.
The plan was already endorsed by the finance ministers of each country, but its official approval by the heads of state puts added pressure on the difficult task of turning what remains an aspirational agreement into distinct legislation.
Nearly 140 countries representing more than 90 percent of total global economic output have endorsed the deal, but they each must implement the new standards in a process that could take some time.
Translation: An agreement in principle to have the rule in force by 2023 is not enacted law.
The average corporate tax rate has fallen from 40 percent in 1980 to about 23 percent today, according to the Tax Foundation. But this move from the G20 will make it harder for corporate giants to hide profits from the tax man. Here in the U.S., that assumes Biden has the votes to get legislation through Congress. As of now, he has no safety factor.
CNBC adds:
“We call on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting to swiftly develop the model rules and multilateral instruments as agreed in the Detailed Implementation Plan, with a view to ensure that the new rules will come into effect at global level in 2023,” the draft conclusions, seen by Reuters, said.
The conclusions are to be formally adopted on Sunday.
[…]
“This is more than just a tax deal, it’s a reshaping of the rules of the global economy,” a senior U.S. official told reporters.
“Countries around the globe have decided that to finance the public infrastructure investments that they need to invest in their people, and not to have all of the burden of raising taxes full on workers … this is a way to make sure that all countries in a fair way,” Treasury Secretary Janet Yellen told CNBC Friday night.
The Post says there is more to the agreement:
The tax deal includes not just a new global minimum tax but a separate — and arguably more controversial — overhaul of how multinationals are taxed when earning profits in countries where they have no physical presence. That related but distinct tax deal is intended primarily to address anger in Europe over the U.S.-based tech giants that pay little in taxes in European countries despite earning substantial sums there. Several European leaders have said they see the measures as tied together.
Skeptics are skeptical. No surprise. Stay tuned.