President Joe Biden’s proposed increases to U.S. corporate tax rates will continue to make the United States uncompetitive internationally, while the G7’s proposed global minimum corporate tax rate will cause harm to our economy, tax haven countries, and businesses.
The Group of 7 (G7) is an association of wealthy, democratic nations whose leaders meet to use their combined wealth and power to shape the global economy.
The financial ministers of these member countries agreed during their annual summit to create a global minimum corporate tax of 15 percent, which would apply to each member as and the EU, with the intention of expanding to the Organisation for Economic Cooperation and Development (OECD). Unsurprisingly, each member country already has a corporate tax rate above this “global minimum,” Canada (15 percent federal, with non-deductible local taxes), France (28 percent, but will be 25.83 percent in 2022), Germany (15.825 percent), Italy (24 percent), Japan (23.2 percent), the United Kingdom (19 percent), and the United States.
The United States presently has a corporate tax rate of 21 percent, but the Biden administration has proposed an increase to 28 percent in order to fund a bloated infrastructure bill. With the increase, the United States will have the highest tax rate in both the G7 and the OECD.
To justify this increase when other countries are rightfully lowering their corporate tax rates to appeal to investment, Treasury Secretary Janet Yellen testified before Congress, declaring the need for an international agreement to create a minimum global rate in order to prevent a “race to the bottom.” This global minimum is intended to somewhat offset the effects of a comparatively higher corporate tax rate.
With agreement from the seven member countries, the proposal still needs to be approved by the European Union, which could be a challenging feat. Despite only being debated by the G7 countries, any agreement will also be enforced over the entire European Union, several of whose members are not particularly enthusiastic about abandoning their individual right to determine their countries own tax policies.
Opposition is mounting from tax-haven countries such as Cyprus and Ireland,
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