For the last few decades, corporations have been shopping across the globe for the lowest corporate tax rate, taking a taste test in Ireland or browsing around Luxembourg. Countries are slashing this levy in the hopes of attracting Amazon, Apple, Microsoft, Google, or some other multinational juggernaut. This tax competition has facilitated a race to the bottom, fueling outrage among policymakers who need to extract as much money from the private sector as possible to fund the next boondoggle, blunder, and botch. President Joe Biden is aiming for a global minimum tax to solve this quagmire. But what does the rest of the planet think about this proposal? Let’s just say it is making globalism great again.
Is the United Kingdom United on Global Taxes?
As one of America’s most important allies in the world, the United Kingdom is not entirely convinced by the U.S. president’s plan for a global minimum confiscatory penalty for businesses. Chancellor of the Exchequer Rishi Sunak and his team contend that the preliminary rate of 21% would be too high over the long term. Instead, Great Britain is pushing Washington and other partners to concentrate measures forcing corporations to pay their taxes in the countries where they operate, rather than paying only where they are headquartered.
The U.K. is set to raise its corporate tax rate to 25% in the coming months, although Sunak has stated that he desires to have the power to cut it again in a couple of years.
That said, the disagreement should not mean that London is sitting on the sidelines. Britain’s Treasury is in full support of an international answer for penalizing businesses, especially for those companies functioning in the digital economy. A Treasury spokesperson said in a statement:
“We welcome the U.S. administration’s renewed commitment to reaching a solution to these challenges through the OECD [Organization for Economic Cooperation and Development]. It’s also crucial that any agreement includes changes to ensure digital businesses pay tax in the U.K. that reflects their economic activities.”
At the beginning of June, G-7 finance ministers will gather in London to discuss “a global solution to the tax challenges created by digitalization of the economy.”
Since U.S. Treasury Secretary Janet Yellen submitted the global tax proposition, worldwide talks about the policy have been ongoing. The OECD believes that 139 countries could establish a concrete plan sometime this summer. However, experts warn that Britain’s apprehension could throw a wrench in these projections.
What About the Developing World?
Biden’s reforms would be beneficial to affluent nations. But what about impoverished countries that rely on additional tax revenues to fund infrastructure, health care, and education? Under the current proposal, the minimum levy scheme would be applied to profits earned in countries headquartered, even if they generate the revenue in developing markets.
Senior diplomats told the Financial Times that if a U.S. company exploits the labor and raw materials in Nigeria or Pakistan, that nation would receive nothing. Mathew Gbonjubola, Nigeria’s ambassador to the OECD, said in an interview with the business newspaper:
“What I understand, with the rules as currently being developed, is that developing countries may get next to nothing.
“It is both logical and moral that the source countries, developed or developing, should have the right of refusal before [tax revenue] passes to [companies’] residence countries.”
The African Tax Administration Forum (ATAF), which advises governments on the continent, recommends the OECD institute a tiered system, utilizing thresholds for smaller economies. ATAF representatives are concerned that developing nations may be unable to negotiate at the table due to the plan’s enormous complexity and potential legal struggle that would require immense resources.
Making Globalism Great Again?
If instituting a global minimum tax is not globalism, what is? Biden and the OECD are threatening the sovereignty of independent nations to impose tax policies they see fit. The outgoing secretary-general of the OECD, Ángel Gurría, believes this is a “once-in-a-lifetime” chance to abolish corporate tax abuse and “achieve a complete overhaul of the international tax system.” The globalists are espousing phrases like a breakthrough, a new era of globalization, and an escape route from years of unilateral measures. Indeed, the internationalists never want a good crisis to go to waste, and they will likely continue to milk the coronavirus pandemic, even years removed from COVID-19, for their big-government agenda.
Read more from Andrew Moran.