he global minimum corporate tax, introduced by Secretary Janet Yellen, is a historic economic regulation that could change the way multinational corporations conduct business. Before the OECD’s formal meeting in Paris in June 2021, several G7 countries met to discuss the feasibility and practicality of a global minimum corporate tax. Each country proposed different obstacles, fears and challenges, but the arguments in favor of the tax continued to grow; therefore, making the reality of the deal increasing more likely. However, as the United States continues to push for this regulation on the international stage, the questions that must be answered by the Biden administration are steadily rising as well: what are the financial implications of the global minimum corporate tax? How will this shift affect the country’s multilateral relationships, and what is the United States doing to preempt the hesitation of Congress to act on this regulation?
The primary concern of corporations are the market effects of the global minimum corporate tax. Many analysts have argued that the tax will disproportionately affect American businesses because many of their tax expenses, foreign and domestic, sit below the 15 percent mark that the Biden administration is calling for. Additionally, this cost could negatively affect the consumer, and, as the country comes out of a national economic crisis, many corporate officials are concerned that this corporate tax may be too soon for the government to push through at this time. The extent of damage has not fully been determined by economists, but it is necessary for the Biden administration to be transparent and upfront about the proposal as negotiations continue.
The positive outcome of the global minimum tax, according to the Biden administration, is the possibility of a reset on the multilateral relationship between the G7 countries. After President Trump’s attempt to extend G7 membership to unaffiliated country leaders and his comments about the organization being an “outdated” group, many G7 members are concerned about the future of the relationship with the United States. Experts have noted that President Biden’s work to get the countries to agree on this global minimum corporate tax is the administration's attempt to renew its commitment to multilateralism generally. It is unclear if this step will work, there is still push back from the United Kingdom and Ireland, but what is apparent is the president’s dedication to making sure the country re-enters the international arena.
What is less promising, on the United States’ front, is the issue of getting the global corporate tax measure through Congress. There is significant push back from the Republicans and moderate Democrats about the optics of America moving so quickly on increasing corporate taxes and the overall long-term effects, causing several countries within the G7 consortium to wonder if the Biden administration has the power to push through the proposal. At this present time, even with the decrease from 21 percent to 15 percent, the outcome of bipartisan support on the global minimum corporate tax is like many other Biden-backed legislative pushes - unlikely.
The future of the global minimum corporate tax is still overwhelming clouded and the chances of the regulation lasting past the Biden presidency is low, but the idea of raising taxes on corporations is expanding in everyday dialogue amongst citizens and governments worldwide. There is a significant need for funding global issues, specifically global health and climate change at this current time, and only multinational corporations have the capital to turn the tide. Ultimately, the best advice to give stakeholders until world leaders answer the question on taxation is to make sure their balance sheets are ready for impact.
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Global Minimum Corporate Tax a Possible Seismic Shift for Big Business
Photo by Erol Ahmed via Unsplash.
June 3, 2021
The global minimum corporate tax, introduced by Secretary Janet Yellen, is a historic economic regulation that could change the way multinational corporations conduct business.
T
he global minimum corporate tax, introduced by Secretary Janet Yellen, is a historic economic regulation that could change the way multinational corporations conduct business. Before the OECD’s formal meeting in Paris in June 2021, several G7 countries met to discuss the feasibility and practicality of a global minimum corporate tax. Each country proposed different obstacles, fears and challenges, but the arguments in favor of the tax continued to grow; therefore, making the reality of the deal increasing more likely. However, as the United States continues to push for this regulation on the international stage, the questions that must be answered by the Biden administration are steadily rising as well: what are the financial implications of the global minimum corporate tax? How will this shift affect the country’s multilateral relationships, and what is the United States doing to preempt the hesitation of Congress to act on this regulation?
The primary concern of corporations are the market effects of the global minimum corporate tax. Many analysts have argued that the tax will disproportionately affect American businesses because many of their tax expenses, foreign and domestic, sit below the 15 percent mark that the Biden administration is calling for. Additionally, this cost could negatively affect the consumer, and, as the country comes out of a national economic crisis, many corporate officials are concerned that this corporate tax may be too soon for the government to push through at this time. The extent of damage has not fully been determined by economists, but it is necessary for the Biden administration to be transparent and upfront about the proposal as negotiations continue.
The positive outcome of the global minimum tax, according to the Biden administration, is the possibility of a reset on the multilateral relationship between the G7 countries. After President Trump’s attempt to extend G7 membership to unaffiliated country leaders and his comments about the organization being an “outdated” group, many G7 members are concerned about the future of the relationship with the United States. Experts have noted that President Biden’s work to get the countries to agree on this global minimum corporate tax is the administration's attempt to renew its commitment to multilateralism generally. It is unclear if this step will work, there is still push back from the United Kingdom and Ireland, but what is apparent is the president’s dedication to making sure the country re-enters the international arena.
What is less promising, on the United States’ front, is the issue of getting the global corporate tax measure through Congress. There is significant push back from the Republicans and moderate Democrats about the optics of America moving so quickly on increasing corporate taxes and the overall long-term effects, causing several countries within the G7 consortium to wonder if the Biden administration has the power to push through the proposal. At this present time, even with the decrease from 21 percent to 15 percent, the outcome of bipartisan support on the global minimum corporate tax is like many other Biden-backed legislative pushes - unlikely.
The future of the global minimum corporate tax is still overwhelming clouded and the chances of the regulation lasting past the Biden presidency is low, but the idea of raising taxes on corporations is expanding in everyday dialogue amongst citizens and governments worldwide. There is a significant need for funding global issues, specifically global health and climate change at this current time, and only multinational corporations have the capital to turn the tide. Ultimately, the best advice to give stakeholders until world leaders answer the question on taxation is to make sure their balance sheets are ready for impact.
