A comment on the baseline global tax for corporations

The G7 agreement on the baseline global tax for corporations is a major diplomatic accomplishment and great news.

When implemented it will help contrast the states’ race to the bottom to attract multinational corporations fiscal headquarters.

Spain has already endorsed the plan (Spain is  not part of the G79.

Negotiators hope to expand the deal to the G20 in 2021. G20 account fo aprox. 80% of international trade.

But let’s not forget a few facts:

  • the average global corporate tax rate is 23% (it was about 40% in the 80s)
  • in the US this is unlikely to pass soon as international treaties require a two-thirds majority in the Senate, and Republicans are voting against *everything* Biden’s administration is proposing (The US senate is 50-50 divided)
  • this won’t fix the issue of profits shifting of IT companies anytime soon for two reasons. 1) treaties enabling Dutch sandwich still exist and will exist for many years to come; 2) to elide the previous (1),  IT corporate taxes need to be fully payed where users reside, not where corporate HQs are fiscally located, and this is now marginal and will require some time as well

Still, it’s a major first step in the right direction. More need to follow.

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