The concept of a global corporate tax rate took a major step Friday. 136 countries agreed to implement a minimum 15% global corporate tax.
The tax measure aims to address the lack of stronger tax measures against the largest tech companies. This accord is the result of more than six years of negotiations among members.
Global Corporate Tax Rate Covers Countries Responsible for 90% of World Output
The Organization for Economic Cooperation and Development (OECD) announced the agreement to implement a 15% global corporate tax rate. Specifically, the countries that agreed to the policy accounted for more than 90% of the world’s output.
In addition, countries that famously offered low corporate tax rates such as Ireland, Estonia, and Hungary also signed into the accord. They joined all member countries of the Group of 20 and the OECD.
As a result, US Treasury Secretary Janet Yellen, who spearheaded negotiations, hailed the landmark agreement. “Virtually the entire global economy has decided to end the race to the bottom on corporate taxation.
Rather than competing on our ability to offer low corporate rates, America will now compete on the skills of our workers and our capacity to innovate, which is a race we can win,” she said.
US Congress Needs to Ratify Agreement
In particular, the global corporate tax agreement can potentially serve as the most impactful policy in how nations impose taxes on multinational corporations. It updates the initial agreement signed in July that 130 countries agreed to.
However, individual signatory countries still need the agreement ratified by their respective legislatures. This includes the United States.
Last Sunday, Yellen said she is confident the US Congress won’t say no to the global corporate tax rate agreement. She said that the actions to involve the United States in compliance will likely be part of the reconciliation budget in Congress.
“Yes. I am confident that what we need to do to come into compliance with the minimum tax will be included in a reconciliation package. I hope that we, that it will be passed and we will be able to reassure the world that the United States will do its part,” Yellen said.
Deal Promises ‘Decades of Prosperity’
Once Congress passes the agreement, Yellen said that the global corporate tax rate will deliver “decades of prosperity” to Americans. The multilateral approach in seeking global economic fairness is a paradigm shift made by President Joe Biden.
It contrasts sharply with the previous administration of former President Donald Trump. In fact, the previous White House occupant preferred unilateral trade measures. By rewriting the rules of global taxation, it removes the previous tilt that favors the needs of corporations over communities.
Meanwhile, Yellen says Americans will find their place in the global economy. “The arcane language of today’s agreement belies how simple and sweeping the stakes are: When this deal is enacted, Americans will find the global economy a much easier place to land a job, earn a living or scale a business.
President Biden often talks about a ‘foreign policy for the middle class.’ Today is what foreign policymaking for the middle class looks like in practice.”
Watch the Bloomberg Markets and Finance video reporting that OECD says 136 nations agree to global corporate tax accord:
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