Finance ministers from the world’s most developed economies said on Wednesday they hoped to agree on a review of the way multinationals are taxed, as well as a minimum tax rate by the end of the year. The lengthy multilateral talks on the issue received a boost this week when US Treasury Secretary Janet Yellen voiced her support for the idea of a global minimum tax rate that would help end the “race to the bottom of 30 years ”on corporate taxes. The plan for an international agreement on the issue was published by the Organization for Economic Cooperation and Development last October, but the Trump administration had by then decided to withdraw from long-running multilateral negotiations. According to the Financial Times, the United States also presented its own proposal this week on how to tax the world’s largest multinationals, along lines similar to the OECD’s suggestions. The current proposals would see large multinational corporations, regardless of the nature of their businesses, taxed in part on a national basis, in proportion to the income they earn from their respective markets. The US government, which plans to increase the tax rate from 21% to 28% over the years, aims for a global minimum rate of 21%, although the OECD has suggested that it could be closer to 15%. . Read: Chances of a Comprehensive Corporate Tax Agreement Improve as Yellen Signs Agreement on Principles
The big picture: Corporate taxes are another important area where the U.S. rejoining a multilateral forum helps fuel stalled negotiations. Roadblocks remain on the road to a deal, but the prospect of new trade and fiscal wars in the post-pandemic global economy, at a cost that the OECD estimates at 1% of global gross domestic product, could help focus minds. Since unanimity will be required for any deal, expect low-tax countries like Ireland (where the 12.5% corporate tax rate is considered a symbol of national sovereignty by all political parties) will vigorously fight for your side.