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A Treasury official says an international tax deal would help make globalization work.

Several top officials from the Biden administration made their case on Wednesday for why multinational corporations should support a global tax agreement aimed at cracking down on tax shelters, with one claiming that the agreement would restore order to globalisation while also blunting the forces of protectionism and populism that have posed a threat to business in recent years.

In his remarks, Itai Grinberg, a Treasury Department official who is representing the United States in the negotiations, provided a new justification for the agreement, which would entail one of the most significant reforms to the international tax system in decades. When fully implemented, the agreement would establish a global minimum tax of at least 15 percent and would allow countries to levy new taxes on the goods and services of the world’s largest and most profitable corporations, regardless of where the companies are headquartered.

Although tax havens have benefited from the “race to the bottom” on corporate taxes, the Biden administration sees the agreement as more than an end to the “race to the bottom.”

As Mr. Grinberg, deputy assistant secretary for multilateral tax at Treasury’s International Tax Division, explained to the National Association for Business Economics in a recent speech, “we believe this agreement is essential to re-establishing the foundation for continued success of the liberal international economic order as we have known it for the last 75 years.”

To achieve this agreement, the Biden administration has been pushing for it as part of its strategy to raise taxes on businesses in the United States without making them less competitive around the world, as well as to persuade dozens of countries to repeal new digital services taxes that have targeted American technology companies. In a framework agreement for the agreement, which is being negotiated through the Organization for Economic Cooperation and Development, more than 130 countries have agreed to participate.

Despite the fact that large corporations have expressed concern about the prospect of higher taxes, Mr. Grinberg argued that they stand to gain more from a tax agreement. If left unchecked, he claimed, a lack of clarity and consensus in the international tax system was leading to increased double taxation, which could cause corporations to withdraw their cross-border investment.

“The consequences of fewer transactions would extend far beyond the interests of large corporations and their shareholders, because the activity of multinational corporations is the backbone of the success of globalisation,” Mr. Grinberg explained. All of this would be detrimental, because globalisation has brought benefits not only to multinational corporations but also to individuals in the United States and around the world, despite its flaws.

It has been argued by the Biden administration that its international tax proposals would increase fairness in the United States as well as in other countries’ economies worldwide. In order to accomplish this, the report asserts, they must put an end to a tax system that allows corporations to pay less tax than middle-class workers, as well as provide nations with more tax revenue that they can use to invest in infrastructure and other public goods. Grinberg stated that this would be beneficial to corporations, arguing that the perception of unfairness was resulting in a business environment that was problematic for multinational corporations.

Would a globally engaged multinational business be able to succeed if economic populism, protectionism, and anti-immigrant sentiment were to take hold as political norms? ” he explained.

There is still much work to be done between now and October, when international negotiators hope to have the agreement completed. It is possible that Ireland, Estonia, and Hungary will not sign the agreement, and that this will prevent the European Union from moving forward with the plan.

When it comes to the United States’ global minimum tax, the Biden administration hopes that Congress will approve its proposed changes this year. It also hopes that Congress will consider the proposal to allow other countries to tax America’s large multinational corporations next year, after technical work on that plan has been completed.

Mr. Grinberg stated in his remarks that it was critical to ensure that the agreement included a dispute resolution system as well as a mechanism to ensure that it was legally binding.

“Getting it right will be an essential part of encapsulating this deal in a multilateral convention,” he said.

source

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