Can Biden's push to tax big corporations go global?

Can Biden's push to tax big corporations go global?
For many, discussion of taxation policy can often have the same effect as a sleeping pill. But now that the Biden administration has ramped up efforts to impose a global minimum corporate tax, the conversation has suddenly gotten way more interesting as other economic heavyweights vie to come out on top.

What is Biden pushing for? The White House wants to raise America's domestic corporate tax rate after deductions to 28 percent, up from the 21 percent threshold (just below the Organisation for Economic Co-operation and Development average) implemented when the Trump administration slashed taxes for the wealthy and corporations back in 2017.

US Treasury Secretary Janet Yellen has also called for a global corporate tax rate, a minimum that all corporations would have to meet no matter which country they are filing in. In theory, developed economies would still set their own local corporate tax rates, but if companies pay lower rates abroad, their home states could essentially "top-up" their taxes so that they still pay the full rate. Importantly, Biden's proposal would also eliminate loopholes in the US tax code that have long incentivized corporations to move profits to tax havens like Bermuda and the Cayman Islands.

Why now? There are two main (and interconnected) reasons that Yellen is going hard on this now. First, Biden recently unveiled the most ambitious infrastructure plan in decades, worth a total $2 trillion. To cover the costs of this massive project, his administration has to get the money from somewhere.

Moreover, in order to avoid potential setbacks US firms might face globally as a result of the new domestic corporate tax hike, Biden wants other countries to follow suit, ensuring that US-based tech and pharma giants remain competitive (and dominant).

Domestic pushback. Reaction in the US has been predictable. Business groups and Republicans warn that upping the tax rate will cut jobs and economic growth. Even some moderate Democrats say that a domestic tax rate of 28 percent is too high. And with the Democrats holding only a razor-thin majority in the Senate, Biden can't afford to lose a single Democratic vote.

But progressive Democrats argue that abolishing tax loopholes that have allowed multinational companies to flourish while inequality deepens is precisely the right move. Proponents of the plan point to a recent report that found that at least 55 percent of America's biggest companies paid no federal corporate income taxes during the last fiscal year.

The view(s) from abroad. For years, big European nations frustrated with American behemoths like Starbucks, Amazon, and Google that flood their markets yet pay nothing back to their governments, have been pushing for a similar global corporate tax rate. France, backed by the UK and Germany, has been leading the way, though the Biden proposal well outpaces the 12.5 percent standardized tax rate the OECD had proposed.

While Washington dragged its feet in the past, it is now desperate to get on board. But there's a catch: Germany and France say that the plan must include rules on taxing US tech giants that quash competition in their countries, something that the European Union as a bloc has long defended.

Still, some countries vehemently reject the plan outright. Ireland, with one of the lowest corporate tax rates in the OECD, has greatly benefited from operating as a tax haven for multinationals to stash their profits, acting as what one academic described as a "tax-avoiding funnel between nation-states." Similarly, the Netherlands has attracted the likes of Nike, Google, IKEA, and others by allowing these corporations to negotiate rates with Dutch tax authorities. As such, The Hague is likely quite comfortable with the current arrangement (no matter the pushback from Brussels).

Looking ahead. Major economies across the Atlantic have never coordinated their tax systems in such a significant way before. Yellen says these tax code reforms would end a global "race to the bottom" that has undercut American businesses and their workers for decades. It's clear, however, that those opposed, both in the US and abroad, are going to put up one hell of a fight.

This time last year, world health experts were speculating about why Africa appeared to have escaped the worst of the global pandemic. Younger populations? Natural immunity created by exposure to past viruses? Something else?

They can stop wondering. Africa is now in the grip of a COVID emergency.

More Show less

Get insights on the latest news in US politics from Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington:

House Speaker Nancy Pelosi barred two Republican members from serving on the Jan. 6 commission. What's going on?

Well, the Jan. 6 commission was designed to be a bipartisan commission, taking input from members from Democrats and Republicans. House Minority Leader Kevin McCarthy had the opportunity to make recommendations but the Speaker of the House, Nancy Pelosi, could always veto those recommendations. In this case, she did, saying no to two members, Jim Banks and Jim Jordan, both of whom are strongly aligned with President Trump and who voted against certifying the election results in 2020. The Republicans for the most part see the Jan. 6 commission as an opportunity to score political points against them, and the Democrats say this is going to be a fair, non-biased, and nonpartisan investigation into what happened on Jan. 6, starting with a hearing next week with some of the police officers who were involved in the battle with the protesters inside the Capitol.

More Show less

In his New York Times op-ed, David Brooks says the US is facing an identity crisis — protecting liberal and progressive values at home while doing little to stop autocrats elsewhere. But has the US really abandoned its values abroad just because it's withdrawing from Afghanistan? Ian Bremmer and Eurasia Group analyst Charles Dunst take out the Red Pen to argue that the US can advance democracy without being the world's sheriff.

More Show less

When the Tokyo Olympics begin on Friday, Japan watchers will be following more than just the performance of Japan's star athletes, including tennis star Naomi Osaka. They will also be tracking the political fortunes of Prime Minister Yoshihide Suga, who is taking a big gamble by staging the event — amid a raging pandemic — in the face of strong and longstanding opposition from the Japanese public. What are the stakes for Suga, particularly with elections on the horizon? Eurasia Group senior analyst Ali Wyne explains.

More Show less

YouTube pulls Bolsonaro's rants: Google-owned YouTube pulled down a series of videos on the channel of Brazil's populist President Jair Bolsonaro, accusing him of spreading misinformation about the pandemic. YouTube removed more than a dozen clips for touting quack cures for coronavirus or claiming, in defiance of scientific experts, that masks don't reduce COVID transmissions. Last year, Twitter and Facebook also removed some content from Bolsonaro's feeds for similar reasons. But critics say that YouTube's move is too little too late, because Bolsonaro has been spreading misinformation about COVID since the pandemic began. Many Brazilians hold him personally responsible for the country's abysmal pandemic response, which has led to almost 550,000 deaths, the second worst toll in the world. Will YouTube's move change Bolsonaro's message? His weekly address to the nation, where he converses not only with government ministers but also various conspiracy theorists and loons, is broadcast on YouTube. Surely he doesn't want to risk losing that — or does he?

More Show less

Boycotts! Bans! Protests! Drugs! Think you've got gold medal knowledge about politics at the Olympics? Test what you know with this special Tokyo Olympics Quiz. And to stay current on all the latest political stories at the Games and around the world, subscribe here to Signal, our daily newsletter. Now, without further ado, the first question is...

More Show less

28: The UK and the EU have again failed to agree on post-Brexit trade rules for Northern Ireland, which is part of the United Kingdom. In a 28-page document, the British government had suggested further changes to trade rules that were already negotiated as part of the Brexit settlement, but Brussels was not having any of it.

More Show less

Subscribe to GZERO Media's newsletter, Signal

GZERO World with Ian Bremmer. Watch episodes now

GZEROMEDIA

Subscribe to GZERO Media's newsletter: Signal

GZERO World with Ian Bremmer. Watch episodes now

GZEROMEDIA

Subscribe to GZERO Media's newsletter: Signal