Biden Administration Proposes Curbs to Global Tax Havens
The suggested rewrite of the global tax system would be “seismic” for corporations shifting profits overseas.
The Biden Administration has proposed sweeping tax reforms to the OECD intended to limit multinational corporations’ ability to move profits overseas, in addition to a worldwide minimum corporate tax rate.
Plans leaked to the Financial Times showed that the administration is pushing for multinational corporations to be taxed not only on the basis of where they declare their profits, but where their customers are situated.
The administration’s proposals are designed to tackle the disproportionately low tax rates paid by international firms, including major US tech giants. Apple has become a prominent example, paying an effective tax rate of under 1% due to declaring its profits in Ireland.
Paul Monaghan, CEO of Fair Tax Mark, said that the proposed changes “would have a seismic impact on the likes of Amazon, Apple, Facebook and Google … with billions of additional taxes paid in the US and across Europe.”
The move marks a significant shift away from past US policies, which proritised the tax sovereignty of nations.
In addition to this, the Biden administration is also backing the establishment of a global minimum corporate tax rate agreed upon between some of the world’s largest economies. The agreement is intended to stop countries from luring foreign businesses by offering tax discounts.
Corporation tax in the US currently stands at 21%, compared to 19% in the UK and 12.5% in Ireland. The Tax Foundation estimates the worldwide average for statutory corporate income tax at 23.85%, or 25.85% when weighed by GDP.
The US’s proposals to the OCD came after G20 finance ministers agreed on Wednesday to work towards an international consensus on tackling tax avoidance.