Global Minimum Tax
Top financial ministers from the global economic Group of Seven (G7) gathered recently. They discussed a global tax agreement and committed to a global minimum corporate tax rate of 15% determined on a country by country basis. The global minimum tax is a set minimum tax rate that will be applied to all multinational corporations who participate in business across the globe. It is intended to increase the corporate tax burden on business investments worldwide, therefore increasing global tax revenue.
By setting a global minimum tax rate, world governments will impose on American corporations a significantly increased share of the global tax burden, and the current Administration will cede American tax jurisdiction to foreign countries. Not only would the global minimum tax make American firms less competitive in the world economy, but would also weaken the U.S. economy, inevitably harming American businesses, jobs, and workers at a critical time in the process of economic recovery following the pandemic. A global minimum tax would generate global and foreign revenue on the backs of American corporations. U.S. multinational corporations employ 28.6 million workers in the U.S. and 14.4 million workers worldwide, meaning the increased tax rate would impact not only global markets, but the U.S. domestic economy as well. The global minimum tax would potentially lead to slower economic growth, lower wages, and less innovation for the United States, which has constantly bred an economically robust and cutting edge agenda on a global scale.
PUERTO RICO AS A PROTOTYPE
WHAT MIGHT CHANGE?
President Biden pushed for the global minimum tax as a prelude to his intentions to raise corporate taxes within America. Therefore, not only would foreign countries have power over American business tax rates, but it would also become a disadvantage to be a company headquartered in the United States. While President Biden proposed tax increases to fund a massive federal infrastructure spending plan, his tax rate proposal would not fully fund this plan, while simultaneously preventing investment in the economy and the creation of American jobs.
Some developing and developed countries rely on their low tax rates to attract capital investment, permitting their economies to function robustly. The global minimum tax rate would lead to reduced investment in these countries, which are also attempting to recover from the economic damage of the pandemic.