The leaders of the world’s wealthiest developed nations on Sunday backed a new 15% global minimum tax on corporations, intended to keep the world’s largest companies from being able to dodge taxes by offshoring profits.
“Critically, the G7 leaders endorsed a global minimum tax of 15 percent. So many corporations have been engaged in what are essentially tax havens, deciding that they would pay considerably less than other — in other environs around the world,” President Joe Biden said in a press conference in England on Sunday. “And — but this is going to make sure there’s a minimum tax, and I’m going to have — I’m going to move on this at home as well — a minimum tax for corporations to pay for the profits they make anywhere in the world.”
“And this agreement is going to help arrest the race to the bottom that’s been going on among nations attracting corporate investment at the expense of priorities like protecting our workers and investing in infrastructure,” Biden said.
Under the tax, known as GMT, if a company pays a tax rate lower than the new minimum by using offshore accounts, the company would have to pay the difference to the country in which it is headquartered. “The policy would also potentially affect some major companies by requiring that they pay taxes in the countries where their good and services are sold, and not just where they are physically present,” Fox News reported.
The G-7 is made up of the United States, the United Kingdom, Canada, France, Germany, Italy, and Japan. The group is meeting in the U.K., and the plan is to bring up the GMT in a meeting of the Group of 20 leaders, scheduled for next month.
“If widely enacted, the GMT would effectively end the practice of global corporations seeking out low-tax jurisdictions like Ireland and the British Virgin Islands to move their headquarters to, even though their customers, operations and executives are located elsewhere,” CNBC reported.
Biden has offered support for a plan to increase the U.S. corporate tax rate to 28% from 21%, along with a slew of other tax increases. A study released last September said the plan would raise taxes by $3.4 trillion on Americans and corporations over the next decade.
The Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania’s Wharton School, put out the study. In addition to trillions more in taxes, the study projected that Biden’s platform would raise federal spending by about $5.4 trillion — or roughly 24% of gross domestic product by 2030, Fox Business reported.
“The spending plan, which is more than double what Hillary Clinton proposed during the 2016 campaign, would be funded by a slew of new taxes, including a corporate tax hike. Biden’s trillion-dollar proposals signal that he’ll continue the unprecedented level of government spending that began in mid-March as American life came to a grinding halt because of the COVID-19 crisis,” Fox wrote.
The Wharton study found that nearly 80% of Biden’s tax increases would hit the top 1% of earners in the U.S. But the study also found that Biden’s platform would bring the largest federal budget increase since Democratic presidential nominee George McGovern in 1972 pledged to deliver a guaranteed minimum income for all Americans, which never happened.