U.S. President Joe Biden will address jobs and the economy at the White House in Washington on April 7, 2021.
Kevin Lamarque | Reuters
The White House stressed Friday that its efforts to introduce a global minimum corporate tax 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 as both Deputy National Security Advisor and Deputy Director of the National Economic Council, told CNBC that efforts to get allies to adopt a minimum tax are 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 allow all members to compete just for their ability to promote innovation and the ingenuity of their respective workforce.
The U.S. Treasury Department has taken the lead in convincing today’s nations to introduce a global minimum tax. The department announced its 15% target on Thursday and said it was encouraged by early conversations with foreign officials over the past week.
A global minimum tax would also allow governments to better generate revenue for domestic projects that the Biden government believes are important to national security, Singh said.
“Our national security strategy is based on the renewal of the country. The kind of challenges I described earlier – the inequality we are witnessing, the tremendous importance of dealing with an existential climate crisis, people leaving the world of work – the government must play a more active role in addressing these challenges. “
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The Treasury Department quickly realized that the 15% proposition below which some had forecast should be viewed as some kind of floor and that subsequent discussions could ultimately drive it up.
As Head of Department, Secretary 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 increase revenues and prevent certain jurisdictions from monopolizing the market for inclusion.
Countries with lower enterprise rates like Ireland and its 12.5% rate have historically expressed doubts about efforts to garner support for a unified approach. Even some defectors of the plan could jeopardize the initiative by setting lower rates and effectively inviting companies to move there.
According to a study by the Tax Foundation 2020, the average top enterprise rate among OECD countries is 23.5%.
However, advocates of a global minimum argue that some countries routinely attract companies with much more relaxed tax regimes through various tax breaks and incentives.
When asked how the government intends to persuade low-tax countries to agree to Washington’s plans, Singh and his colleagues stressed the importance of a level playing field for tax policy.
“We are very clear: companies have been competing on the basis of [countries’] Tax rates. This is a destructive race to the bottom that makes everyone worse off. Especially employees who generate an ever larger share of our tax revenue, “he said.
“Our proposal is therefore to agree on a minimum tax rate for companies around the world. Then we will compete for our ability to innovate, the dynamism of our workforce and our technological edge,” added Singh.
That may be why the Biden government opted for a flexible benchmark: low enough not to scare skeptical countries, but open to change in the future.
The tax rate “corresponds to the minimum tax for highly profitable companies proposed by the Biden Administration, so 15% is where Biden believes the lowest corporate tax rate when all deductions are fully factored in,” said Raymond James analyst, Ed Mills in CNBC an email Thursday evening.
“This is lower than President Obama’s proposed 19% and recognizes that even 15% will be a tough task,” he added.
The Biden administration is in the midst of fierce negotiations at home, particularly over two massive laws that would fundamentally change parts of the US economy.
The infrastructural American employment plan would invest several hundred billion dollars in rebuilding hard infrastructure, but also in financing scientific innovations, paying for household help and building around 500,000 charging stations for electric vehicles.
Its parallel proposal, the American Families Plan, provides $ 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 the tax code designed to expand the IRS to combat tax evasion and end the reinforced base for valuation of inherited capital Profits and introduction of the global minimum tax.
The Biden team has also proposed raising the U.S. corporate rate to between 25% and 28%. He wants households making more than $ 1 million a year to pay more for capital gains and close the interest income gap.