Global Tax Revision Wins Steam as G20 Supports New Taxes

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“For the United States, there will be a fundamental shift in how we choose to compete in the world economy,” Ms Yellen said. “It is not competition based on the lowest tax rates, but rather competition based on the skills of our workforce, our ability to innovate, and our core competencies.”

Policymakers continue to grapple with what the global minimum tax rate will be and what exactly will be taxable.

A separate proposal calls for an additional tax on the largest and most profitable multinationals with profit margins of at least 10 percent. Officials want to apply this tax to at least 20 percent of profits that exceed the 10 percent margin for these companies, but continue to debate how revenues will be divided among countries around the world. Emerging economies are pressing to ensure they get their fair share.

Mr Bradley of the Chamber said the details of a final settlement would determine how punitive it would be for companies. As the process continued, Google and Facebook representatives contacted senior Treasury officials.

American companies are concerned about being put at a disadvantage by President Biden’s proposed 21 percent tax on their overseas profits if their foreign competitors pay only 15 percent. The Biden administration also wants to increase the domestic corporate tax rate from 21 percent to 28 percent. Democrats in Congress are moving forward with legislation to make these changes to the tax code this year.

“If a U.S. company is trying to compete globally with a significantly higher tax burden because of this significantly higher minimum tax in its operations, it’s a competitive challenge to succeed,” said Barbara Angus, global tax policy leader at Ernst. & Young.

Washington and Europe are also at odds over how to tax digital giants like Google and Amazon.

At the G20 summit, finance ministers expressed their optimism that such obstacles could be overcome. Italian Finance Minister Daniele Franco, at his closing press conference after the agreement was reached, hailed the agreement as historic and urged countries that have not yet joined to reconsider.

“Adopting global rules is difficult for any country. Every country should be ready to compromise,” he said. “Having worldwide rules for taxing multinational companies is a big change, a big achievement for taxing the profits of big companies.”

Liz Alderman Contributing reports from Paris and Eshe Nelson from London.

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