A good opportunity to reform global corporate tax
The Biden administration has proven to be imaginative and bold in many ways. However, from the perspective of its main partners, no proposal is more important than a proposal for a partner. The lowest tax rate for global effective corporate tax. This should open the way for solving many problems that are equally important technically. Its partners should seize this opportunity and agree to reform.
In the world of multinational corporations, mobile capital and seamless digital transactions, corporate taxation poses at least three major challenges.First of all, it’s too easy for a modern enterprise Shift most of the profits to tax havens(Such as Bermuda or the Cayman Islands) or a low-tax jurisdiction (such as Ireland). Secondly, all countries are carrying out “Race to the lowest pointCorporate tax, and eventually they lost it. Finally, it is difficult to determine where modern companies (especially digital companies) with large amounts of intangible assets conduct business. This appropriately adds to the other two problems.
As these challenges became more and more apparent, the OECD initiated a response to the so-called “Foundation erosion and profit shiftingThese discussions are ultimately determined on the two “pillars” of any resolution: the “first pillar” focuses on how profits should be distributed, and the “second pillar” focuses on the demand for the lowest global interest rate.
However, an agreement was not reached until the Biden administration was elected. A problem related to Pillar One is that the United Kingdom, France, and other countries want to impose taxes on digital giants operating in their economies, but there is almost no corporate tax even for domestic competitors. Another related to the “second pillar” is to agree on any minimum tax rate.
The US proposal made the world part of the solution, but it did not go all the way.
It does provide the lowest tax rate. Initially, the United States proposed a 21% tax rate. But it has reduced this ratio to a less burdensome 15%. This is a major concession because the government wants to increase the overall title rate in the United States to 28%. The government must be less likely to make further concessions, because the risk of a new round of race to bottom is greater, and the gap between the agreed minimum interest rate and the domestic interest rate in the United States is also greater.
It also provides only one solution to the desire to tax digital businesses, namely Very important for Rishi Sunak, Chancellor of the Exchequer. Sunak is not only interested in raising taxes from British companies. He also wants to levy taxes on the global digital giants doing business here to reflect the widespread push for local taxes on local sales. Washington insists that it cannot accept discrimination against American companies and that no taxation system should be implemented in any department.
Therefore, the US proposal is to focus on the 100 largest multinational companies. It believes that this can raise as much money as considering more funds raised. It will also focus on companies that benefit the most from the global market, engage in the most intangible activities, and are most capable of handling complex cross-border profit distribution.
The global corporate tax system does not have a perfect system, partly because of the complexity of the problem, and partly because of the conflict of national interests. But the U.S. proposal has now opened up a compromise space for solving the current major challenges, including stopping the abuse of tax havens, stopping competition, and preventing large companies from operating freely in a country’s market without paying taxes. This will solve today’s major challenges. challenge. . This is a good beginning. A satisfactory agreement must now be reached.