Finance ministers from Group of Seven nations meeting in London on Friday are expected to back President Biden’s call for a global minimum tax on corporate profits, giving him an early win in a grueling diplomatic campaign that is just beginning.
The new minimum tax, one half of a two-pronged global reform effort, is designed to halt a cycle of corporate tax-cutting that has sapped government revenue around the globe. As part of a package deal, negotiators are also wrestling with European demands to tax American technology giants such as Google and Facebook, which earn substantial revenue in countries where they have little physical presence.
Biden catalyzed the global tax debate this month by lowering to 15 percent from 21 percent his proposed worldwide minimum. Putting a floor beneath multinationals’ tax bills in other countries would help the president raise the corporate rate at home to 28 percent by reducing the incentive for corporations to continue shifting hundreds of billions of dollars in profits to low-tax venues.
Along with opposition from corporate lobbyists, additional obstacles loom, including objections from low-tax countries such as Ireland as well as likely noncompliance from China and Russia. After more than three decades of factory offshoring, any global minimum levy also might only minimally reshape the map of global production and investment.
“Fundamentally, the goal for all of us is to make sure companies that are multinationals are paying their fair share of taxes,” Deputy Treasury Secretary Wally Adeyemo said in an interview. “Anything we can do to close the gap is going to be a boon to the American economy and business” [Reuters].
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