U.S. Treasury Secretary Janet Yellen said on Sunday that by blocking the use of tax havens, countries would fundamentally replace their economies with unprecedented tax rates that could rob governments of money for infrastructure and l ‘education. He said he would be able to compete in the United States.
Yellen said that after finance ministers from a group of 20 major economies approved a global minimum corporate tax of at least 15%, it would lower the tax rate and discourage businesses from using corporate taxes. low tax countries as tax havens. He said it was a measure aimed at that.
“This agreement will put an end to the race to the bottom,” he said at a press conference after the meeting in Venice.
âInstead of asking a question,â who can offer the lowest tax rate? âThis will allow all of our countries to be competitive on the basis of economic fundamentals – the skills of our workforce. , The capacity to innovate and the strength of our legal and economic systems, âshe said.
âAnd this agreement will give our country the capacity to raise the necessary funds for essential public goods such as infrastructure and R&D. [research and development] âEducation,â Yellen added.
The global minimum proposal faces political and technical obstacles before it comes into force. Details will be worked out in a few weeks by the Organization for Economic Co-operation and Development in Paris, followed by final approval by the Group 20 president and prime minister at a meeting in Rome from October 30 to 31.
In this case, each country must legislate on charges in its own law. If the home country is a low-tax country and the company’s overseas income is not taxed, the idea is to tax that income nationally. This way, there is no reason for a company to use complex accounting schemes to shift profits to a subsidiary in a low-tax country that may do little or no real business.
The United States has already imposed such a tax on foreign interest, but the tax rate is at least 15%. Republicans have opposed President Joe Biden’s proposal to raise the rate of return on foreign companies to 21% to help pay for infrastructure and clean energy investments. The Democratic president has a majority in parliament.
The three European Union countries that participated in the minimum tax talks refused to approve the proposal. Ireland, Hungary and Estonia could hamper adoption in Europe, where EU-level tax issues require unanimous consent. Ireland, where low tax rates are part of its professional business model, said its overall rate of 12.5% ââwas a fair rate.
The tax system will also give the country the right to tax some of the interests of large global corporations that make money in their jurisdiction but do not physically exist. Examples include online retail and digital advertising.
Some countries, particularly France, have started to impose such taxes on American technology companies such as Google and Amazon. The United States views these taxes as unfair trade practices and threatens retaliation through tariffs on imported goods. As part of the tax system, countries will withdraw these taxes in favor of a single comprehensive approach.