The G20 endorsed President Biden’s 15% “global minimum tax” on corporations.
Over the weekend, members of the G20 — an international forum constituted by the United States, China, Germany, South Korea, the United Kingdom, and fourteen other leading economies, plus the European Union — met to discuss climate change, taxation, and other global economic issues.
During the summit, United States Treasury Secretary Janet Yellen touted the necessity of combating the “race to the bottom” for corporate taxes:
We need sustainable sources of revenue that do not rely on further taxing workers’ wages and exacerbating the economic disparities that we are all committed to reducing. We need to put an end to corporations shifting capital income to low tax jurisdictions, and to accounting gimmicks that allow them to avoid paying their fair share. We need to ensure that the globalized economy does not continue to shortchange our middle classes so that it can remain open and free, thereby encouraging economic growth and business certainty. This race to the bottom must end, and working together we can ensure that it does.
A Saturday morning statement from Yellen affirmed global support for the policy:
The world is ready to end the global race to the bottom on corporate taxation, and there’s broad consensus about how to do it — with a global minimum tax of at least 15 percent. One hundred thirty-three nations — representing more than 90 percent of the global economy — agree on this. The world should now move to finalize the deal.
CNBC reports that all members of the G20 now support the proposal.
As The Daily Wire reported last week, President Biden has been leading an international effort to discourage individual nations from setting their corporate tax rates below 15%. The White House said that countries’ decisions to lower taxes in the interest of attracting foreign capital “pushes nations to compete over who can offer the lowest tax rate to large corporations at the expense of protecting workers, investing in infrastructure, and growing the middle class.”
Smaller nations — which compete with larger economic powers by cutting taxes and regulations — are beginning to reject the deal. CBS adds that low-tax countries such as Ireland and Hungary are still opposed to the deal, but will be “encouraged to sign up by October.”
When the global minimum tax framework was unveiled during the G7 summit last month, Irish Finance Minister Paschal Donohoe said that “small countries… need to be able to use tax policy as a legitimate lever to compensate for advantages of scale, location, resources, industrial heritage, and the real, material and persistent advantage enjoyed by larger countries.”
As members of the European Union — which would require unanimous consent for the global minimum tax to enter into effect — Ireland and Hungary’s continued resistance could threaten the deal.
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