A global minimum corporate tax to combat avoidance?
US Treasury Secretary Janet Yellen has proposed the introduction of a global minimum tax rate on corporate profits - also in view of Joe Biden's plan to increase corporate tax in the US from 21 to 28 percent. Does the proposal have the potential to rein in multinationals that artificially shift their profits to countries with low corporate taxes? European commentators say this is a promising initiative.
Competition has driven tax rates downwards
Corporate tax rates have dropped steadily in recent decades, La Stampa explains:
“In OECD countries, the average tax on corporate profits was around 42 percent in the mid-1980s. It is currently below 25 percent. A crucial factor behind this decrease has been the competition between the world's 200 countries in their bid to attract companies - which have become increasingly 'mobile' in the course of globalisation - with lower taxes. This mobility when it came to shifting profits from one country to another partly reflected tax avoidance phenomena and partly reflected a real relocation of productive activities to countries where taxes were lower. The fact is that this competition led to a reduction in the tax rate on profits.”
Jointly eradicate tax havens
The US's change of course is also a historic opportunity for Germany and the EU, the Süddeutsche Zeitung comments:
“They should put a lot of energy into negotiating an agreement from which everyone benefits. ... In the digital age in which no one can say exactly where a service is provided, uniform, efficient corporate taxation is only possible at the international level. The minimum tax should allow inter-state competition between tax systems while preventing a downwards spiral of taxation rates, so that governments can rely on solid financing. This might not be the end of tax havens, but it would minimise their importance. ... Janet Yellen should be taken at her word.”
The pandemic has a silver lining
Yellen's proposal is based on an insight that the US might never have gained had it not been for Covid, Avvenire writes:
“Nobody would have thought that it would take a virus to convince the government of the most powerful state in the world to drastically change its socio-economic and geopolitical strategy and tax the richest to stop growing inequalities. ... Yet this is a foretaste of the policy announced by Janet Yellen. ... With her statement that the 'America first' slogan should not become 'America alone', Yellen also made it clear that the US cannot play fiscal solitaire in such a networked world. Hence this proposal to stop the downward spiral in tax cuts.”