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The United States reignites the global battle against tax optimization

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US Treasury Secretary Janet Yellen said on Monday she wanted to agree with her international partners on a minimum corporate tax rate, regardless of the country in which they are established. If passed, this proposal would open a new chapter in the history of global taxation and deal a serious blow to tax havens.

Will 2021 be the year of a major upheaval in corporate taxation? After decades of global tax competition, the rules of the game may soon change. In any case, this is the wish of the world’s largest economy and its Secretary of State for the Treasury, Janet Yellen.

“We are working with the G20 countries to agree on a minimum corporate tax rate,” Economy and Finance Minister Joe Biden said Monday, April 5, during a speech in Chicago .

According to the new administration, it is urgent to “put an end to this race to the bottom” in which some countries are proposing ever lower tax rates to attract businesses to their territory.

The United States are all the more in favor of this harmonization since they themselves have planned to increase the corporate tax to finance the gigantic investment plan of $ 2 trillion over eight years, presented on March 31 by Joe Biden.

This minimum tax rate would thus prevent the United States from suffering too much competition from more generous countries in tax matters.

>> To read: From the Fed to the US Treasury, Janet Yellen’s flawless journey

An agreement by the summer?

The idea of ​​a global minimum tax is not new. Since 2017, profits made abroad by American companies have been taxed between 10.5% and 13%. Biden wants to raise that rate to 21%.

“It is about putting in place a safety net to fight against the localization of profits in countries where there is little tax, analysis for France 24 Pascal Saint-Amans, director of the Center for Fiscal Policy and Administration of the OECD. The United States invites its partners to share this approach by establishing a global minimum tax ”.

Pascal Saint-Amans, a figure in the fight against tax evasion, has been working on this idea with OECD countries for four years. According to him, the project is already well advanced. France and Germany are in favor. If blockages in Ireland or even Eastern countries will be inevitable, the American commitment on this issue has just triggered “a real dynamic”.

The International Monetary Fund was also in favor on Tuesday of imposing a minimum global corporate tax.

“A comprehensive agreement on international taxation is now within reach”, also welcomed the French Minister of the Economy Bruno Le Maire, calling for “seize this historic opportunity”.

The subject will be discussed on Wednesday, at a meeting of the G20. The organization hopes to reach an agreement by the meeting of finance ministers and central bankers of member countries on July 9 and 10. The level of taxation has yet to be negotiated.

The project discussed at the G20 concerns all sectors of activity, but digital multinationals, the big winners in 2020 from the Covid-19 pandemic, are particularly targeted.

After the shock wave of the pandemic which has plunged the economies of the planet into recession, the argument for better tax regulation seems more relevant than ever.

“During this period of Covid, governments sort of nationalized wages with short-time work and took the place of businesses. It would be incomprehensible that the companies which benefited from these measures could put their profits in tax havens ”, pleads Pascal Saint-Amans.

The Congress stage

If the international context therefore seems favorable to the entry into force of a taxation of profits made abroad, obstacles still stand in the way of Joe Biden. The American president also wants to increase the taxes of American companies from 21% to 28%, nevertheless much lower than the rate of 35% applied before the tax cuts of Donald Trump in 2017.

In the United States, the business community strongly opposes a tax hike that they believe could harm the economic recovery and even scare away American businesses. To achieve his ends, the tenant of the White House will have to fight hard in the Senate, where he has only a narrow majority.

Facing criticism, Joe Biden reiterated Monday that the tax hike should not lead American companies to move abroad. “We are talking about a 28% rate that seems fair to everyone,” he said.

“28% is barely above the OECD average. It is not a revolution. We are rather here in the presence of a return of the State and the political ”, tempers Pascal Saint-Amans. “In recent years, there has been a decline in the contribution of companies which has resulted in an increase in deficits and a tax burden for the middle classes globally. The United States says we must reverse the trend ”.

According to a US report released Friday by the Institute on Economic Policy and Taxation, more than 50 of the largest US companies like Nike or Fedex paid nothing in income tax last year at the federal level. Some have even obtained reimbursements thanks to a variety of tax tricks ranging from deferred payment to investing in renewable energy to obtain tax credits.

In front of journalists, Joe Biden summed up the new doctrine of his administration: “We are simply asking American companies to pay their share”.


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