- Reuters reports that the Group of 7 is set to back a global minimium corporate tax.
- The proposal would disincentivize countries from moving countries for better tax rates.
- It would also work in tandem with President Biden’s proposed corporate tax rate increase.
- See more stories on Insider’s business page.
Finance ministers for the Group of 7 are set to back a new global minimum tax, according to a Reuters report. The move would potentially be a major step forward for both the Biden administration and international taxation.
According to a draft obtained by Reuters, the group supports the push for a tax by the Organization for Economic Cooperation and Development and has a “high level of ambition” for its eventual rate.
A global minimum corporate tax would, in practice, curb multinational companies from fleeing to countries with lower tax rates. A unilateral agreement ensures that enough countries would have the same – or at least similar – taxes on companies, disincentivizing companies from packing up and moving elsewhere for better taxes alone.
The global minimum tax has also emerged as a key policy for the Biden administration’s Treasury Department. In her first major public address, Treasury Secretary Janet Yellen called for its creation.
“Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity,” she said.
It’s also a measure that would go hand-in-hand with Biden’s own domestic agenda. He’s proposed increasing the level of corporate taxation to 28% from 21% to offset the cost of his infrastructure package; a uniform tax in competing countries could disincentivize countries from leaving the US if that tax passes (although it’ll probably be closer to 25%).
However, the US has put forward 15% – not 21% – as the tax’s potential rate. Treasury officials told The New York Times that that number was a floor, but their proposal was met “enthusiastically.” The draft obtained by Reuters does not have any specific numbers, according to the outlet.
Support from the G-7 would mark a major step forward for the measure, indicating support from a powerful group of countries. But there’s still a journey ahead before it’s finalized and enacted. G-7 approval could help bolster the OECD talks, and represent a first step in striking a historic agreement.
But the US is also dealing with its own tax debate domestically. Taxes are going to be a hot topic this summer, as Democrats negotiate a razor-thin majority to pass higher taxes on corporations, high-earning individuals, and wealthy investors. A global minimum tax may have to be passed in the US through legislation – something at least one Republican senator has voiced opposition to.
G-7 approval does, however, indicate support abroad for Yellen’s crusade to pause the taxation “race to the bottom.”