Essay
JUNE 2021
40
Seismic: will global corporate tax rate work? US president Joe Biden’s proposed reforms have given fresh momentum to calls for a global consensus on taxing company profits. Even Pierre Gramegna seems to be on board. But is creating a more level playing field really fair and desirable? Words DUNCAN ROBERTS Illustrations SALOMÉ JOTTREAU
As the world strives to recover from the impact of the covid pandemic, finance ministers are exploring ways to reboot their economies. Several countries--most notably the United States under the fresh stewardship of president Joe Biden--have even announced bold infrastructure investment programmes as a way of providing much needed economic bounce. But that will require finding additional income through the implementation of stringent fiscal policies. Raising income taxes that would additionally burden the general populace after they have gone through close to two years of hurt is anathema to most politicians. Biden’s solution is to seek redress from the corporate world, while trying not to punish the middle classes who own the small
businesses that successive presidents have tax of 21%. This would end what she called claimed are the backbone of the country. a “30-year race to the bottom” and ensure So, he eschewed plans that had been mulled a more level playing field that would spur over to increase payroll tax contributions “innovation, growth and prosperity”. for social security, for example. The backlash was swift. Fortune magBiden is going after big business and azine said the plan would “create an Opecthose companies that use base erosion and like tax cartel” that “amounts to tax profit shifting (Beps) to minimise tax on policy imperialism, trampling over the their profits. Biden wants, for example, to economic sovereignty of small export-oridouble the US minimum rate for global ented countries”. Foreign Policy said it intangible low-taxed income, or Gilti, from was a bad idea whose likely failure would 10.5% to 21%--the current rate of corporate not only embarrass Biden, “but could also tax in the States, which the president also empower countries seeking to undermine wants to increase to 28%. the liberal international order, especially A cornerstone of the Biden adminis- China and Russia”. tration’s proposals has been the call, outlined by treasury secretary Janet Yellen in Inclusive framework a speech to the Chicago Council on Global So, where does that leave the Inclusive Affairs, for a global corporate minimum Framework efforts of the Organisation
