The Biden administration has proposed a new model for the taxation of multinational corporations, which calls on the world’s largest corporations to pay levies to national governments based on their sales in each country as part of an agreement with a global minimum tax.
In documents sent by the Financial Times to the 135 countries negotiating international taxes at the OECD on Wednesday, obtained by the Financial Times, the US Treasury has drawn up a plan that will apply to the global profits of the OECD. very large companies, including large American technology groups, regardless of their physical presence in a particular country.
The aim of the plan is to catalyze negotiations with the OECD, the international organization of wealthy countries, with the promise of a more stable international tax system that will stop the spread of national digital taxes and break the form of tax avoidance and profit shift by many multinational companies.
The US concession during the week of the IMF and the World Bank’s spring meetings comes because the White House has asked to increase US corporate taxes by about $ 2.5 tons over the next 15 years to more than $ 2 tons in infrastructure investments, clean energy and manufacturing.
After almost a decade, the OECD tax negotiations broke down into two parts. The first pillar is designed to introduce a new tax system for the largest multinational companies, while the second pillar is designed to address the global minimum tax rate, which the US wants to reach at 21 percent.
An agreement with the OECD would allow the government of Joe Biden to increase corporate taxes on U.S. companies without being overtaken by other countries, as it would include a widely applied global minimum tax rate.
If the US plan were adopted, other countries could increase revenue from large US technology groups and other multinational corporations operating in their jurisdictions but paying little corporate tax.
The offer from Washington reflects Biden’s broader goal of ending what officials described as a race to the bottom over global taxes that have deprived governments of the revenue needed to fund basic services and investments.
Negotiations on international taxation have been entrenched at the OECD for years because the US has objected to what it sees as attempts by other countries to impose agreements that discriminate against US multinational companies, especially large US technology companies.
The Trump administration has insisted on a “safe haven” provision that would make compliance by U.S. technology groups voluntary. Shortly after accepting this year, Biden dropped the claim, but this week’s proposal offers a new solution.
The US Treasury is now offering another formula in which only the very largest and most profitable companies in the world are subject to the new rules, regardless of their sector, based on their level of revenue and profit margins. This is likely to include about 100 companies, consisting of the major U.S. technology groups and other extremely large multinational companies.
The proposals have already been shared with the OECD, which is investing in the negotiations and trying to bring countries together to generate the outlines of a global agreement by the summer.
Pascal Saint-Amans, Head of Tax Administration at the OECD, welcomes the US proposals. “It starts the negotiations again and is very positive,” he said. ‘This is a serious proposal with the chance to succeed in both the [international negotiations] and U.S. Congress. Peace is more important than anything else and it will stabilize the [international corporate tax] system in the post-coronavirus environment. ”
Saint-Amans added that the proposal is likely to generate just as much revenue for other countries as the OECD proposal, while the US could also raise the money it wants from its largest companies.
Many international tax campaigners said the OECD proposals did not go far enough or provide adequate taxation to emerging economies. The US proposals do not significantly change this feature, although the US documents indicate that the US is willing to be flexible with regard to some details.
An agreement will help resolve the transatlantic trade dispute between the US and several countries that have implemented taxes on digital services instead of a broader multilateral agreement.
Among other things, Washington has threatened to impose tariffs on countries such as France, the United Kingdom, Italy and Spain over the digital tax, which US technology companies are being asked to pay, on the grounds that US companies unfairly discriminate.