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Summary
- Treasury Department eyes 15% minimum corporate tax on overseas profits of US companies.
- OECD estimates that countries lose US$240 billion to companies that shift their earnings to countries having lower tax base.
- The Treasury Department insists that the base rate should be 15% or higher. Earlier, it was insisting on a 21% corporate tax.
On Thursday, the US Treasury Department said that all countries should agree to 15% global minimum corporate tax in negotiations held internationally. It aims to end the competitions among nations that end up offering cheap tax, thereby losing revenues.
The department underlined that it was essential to work in the interest of all to end the pressure of corporate competition and corporate tax base erosion. It insists that the base rate should be 15% or higher. Earlier, it was insisting on a 21% corporate tax.
The department underlined that it was important to work in the interest of all to end the pressure of corporate competition and corporate tax base erosion. It insists that base rate should be 15% or higher. Earlier, it was insisting on a 21% corporate tax.
Source: Pixabay.
Also read: How would Joe Biden becoming the U.S President prove beneficial for New Zealand?
The Organization for Economic Cooperation and Development (OECD), a group of 20 major economies, has been asking for a minimum corporate tax rate for a long time. It is one of the efforts by countries that the Treasury Department calls 'race to the bottom' - in which nations minimise corporate tax to attract multinational companies to invest in their countries.
As countries reduce corporate tax, they fail to raise enough revenues for investments. The Treasury said that other countries positively responded to its proposal.
Also read: OECD: Australia's Fiscal Stance Seems to be on a Better Side of Things
OECD estimates that countries lose US$240 billion to companies that shift their earnings to countries having lower tax base. But countries that have lower corporate taxes, like Ireland, which charges 12.5% in tax, is doubtful of Biden’s higher tax proposal. His administration aims to hike corporate tax to 25% by 2023 to recover from the Covid19 induced losses.
Also read: Yellen bats for increased taxes for businesses
Why is the US at the forefront to revamp the tax system?
President Biden has proposed 28% corporate tax from the current 21% to fund his US$2.3 trillion public projects. He also proposed a minimum tariff of 21% on overseas earnings of US companies.
