The Biden administration proposed a global tax on multinational corporations of at least 15 percent in the latest round of international tax negotiations, Treasury Department officials said on Thursday, as the U.S. looks to reach a deal with countries that fear hiking their rates will deter investment.
The rate was a lower-than-expected proposal from the United States, and the Treasury Department hailed its positive reception among other countries as a breakthrough in the negotiations. The fate of the talks is closely tied to the Biden administration’s plans for overhauling the corporate tax code in the United States, and the White House is pushing to reach an international agreement this summer and pass legislation later this year.
President Biden has proposed raising the corporate tax rate in the United States to 28 percent from 21 percent, which would be higher than the rate in many other countries. A deal over a global minimum tax would better allow the United States to make the increase without putting American companies at a disadvantage or encouraging them to move operations offshore.
Treasury has been holding meetings this week with a panel of negotiators from 24 countries about the so-called global minimum tax, which would apply to multinational companies regardless of where they locate their headquarters.
said in a statement after the meetings.
The negotiations over the global minimum tax are part of a broader global fight over how to tax technology companies, and they come as the Biden administration is trying to fix provisions in the tax code that it says incentivizes moving jobs overseas. The talks have dragged on for more than two years, slowed by the recalcitrance of the Trump administration and the onslaught of the pandemic.
As part of its American Jobs Plan, the Biden administration called for doubling a tax called the global intangible low-taxed income (or GILTI) to 21 percent, which would narrow the gap between what companies pay on overseas profits and what they pay on earned income in the United States. Under the plan, the tax would be calculated on a per-country basis, which would have the effect of subjecting more income earned overseas to the tax than under the current system.
If the 15 percent global minimum tax rate is adopted, it would still leave a gap between that rate and the Biden administration’s proposed U.S. domestic rate. Treasury officials have argued that the new gap would be smaller than the current one and therefore would not diminish the competitiveness of American companies. A large delta between the global minimum tax and what U.S.-based companies face on their foreign income gives companies that are based outside of the United States an advantage.
American companies have been watching the different moving parts of the negotiations closely. Big businesses have been generally wary of the Biden administration’s tax plans.
also expressed skepticism this week.
Manal Corwin, a former Treasury Department official in the Obama administration who now heads the Washington national tax practice at KPMG, said that other countries had been under the impression that the United States was set on a 21 percent global minimum tax, which would match the tax rate the Biden administration has proposed for U.S.-based companies’ foreign income. The fact that the U.S. is ready to negotiate from a lower rate is important, she said.
“To get a deal, it was important for the U.S. to clarify that they’re not necessarily saying 21 percent or nothing,” Ms. Corwin said.