Where is the global tax, according to the Wall Street Journal
On Friday, as officials from 136 countries approved new rules for corporate taxation, the super tax lobby reached a much-needed deal. The focus now is on the national governments responsible for implementing this agreement, especially the US Congress should try to figure out what it is attracted to.
Global tax transactions more or less follow the editions prepared by the Organization for Economic Co-operation and Development (OECD) earlier this year by the G7 finance ministers and later by 130 governments.
The project is based on two pillars. The first is a major overhaul of the century-old rules for taxing large companies, which technology companies see above all else. Second, the new global minimum tax rate is 15%, which should limit competition between governments in tax policy – Writes WSJ In his editorial.
The deal was made possible because the Biden administration violated Washington’s long-standing bilateral agreement, and such a deal would hurt American business. Democrats want to impose very high U.S. taxes on the profits of American companies at home and abroad, and they think it would be easier to swallow the pill if lawmakers think other countries are raising their taxes.
In a statement, Treasury Secretary Janet Yellen approved the OECD deal, which includes a request to Congress to achieve a tax increase “quickly” as a global transaction now takes place.
Before following this bad advice, lawmakers may want to know how this global deal went overboard. Quick summary: Other governments have blocked the lowest tax rates and then tried to delay full implementation as much as possible.
Ireland is an exemplary case. The Celtic tiger could not withstand the intense pressure from neighboring countries and the United States to cut rates by 12.5%, and this week it agreed to the OECD’s request of 15%, but in accordance with its terms. In the summer, the OECD proposals talk about a rate of “at least 15%” and, as suggested by Ireland (Switzerland), the “minimum” has now disappeared.
While Brussels was legislating to implement the global agreement, Dublin received a special pledge that the European Union (of which Ireland is a part) would not develop tax laws beyond the OECD agreement. This prevents companies with annual revenues below the ഇ 750 million OECD limit from using the OECD agreement between France and Germany as an excuse to maintain a tax rate of 12.5% in Dublin and raise European taxes.
The message of all this to Congress is that, no matter what Yellen expects, the rest of the world will not easily allow the global minimum tax rate to rise above the competitive US rate.
There were other changes to get the final deal. Switzerland insisted on more generous concessions on salary costs and fixed deposits than the initial OECD recommendation. Hungary called for the long-term suspension of those concessions (10 years, instead of 5 years), which was signed by Estonia after it was decided that the tax would not increase for Estonian companies.
Even after the settlement, countries participating in the OECD process are still years away from implementing it. Once the final sentence of an agreement is signed, each of the 136 governments will have to amend its national tax law in accordance with the global agreement.
But do not assume that everyone will do so in the end. The accompanying technical tax would require changes in the bilateral tax treaty, which would take years to approve.
Yellen and progressives hope that the OECD’s global tax transaction will provide political protection for the imposition of more severe taxes in the United States, but there is a limit to how much other companies can obstruct their companies with higher taxes. Democrats now want to raise taxes in the United States, while foreign tax increases are a long way off.
The global tax plan is a bad policy that reduces tax competition, which has helped countries like Ireland attract more investment and grow faster. It serves the interests of the political class, not the workers. But Congress should not exacerbate the damage by making more U.S. taxes than Yellen’s negligent global tax.
(Excerpt from the APR Communicion’s foreign newspaper review)
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