Why the US Is Missing out on the Global Tax That Will Raise Billions
Written by
Yaël Bizouati-Kennedy
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This year, several countries that had agreed to a global tax deal in 2021 will start implementing the changes. But the U.S. might not be reaping its benefits.
In 2021, the Organization for Economic Cooperation and Development (OECD) said that more than 140 countries agreed to introduce a global minimum corporate tax rate set at 15%.
The new minimum tax rate will apply to companies with revenue above $808 million (€750 million). In January 2024, the OECD updated its global minimum tax revenue estimates and now estimated that it will raise $155-192 billion globally, according to the Tax Foundation.
Yet, the U.S. might be missing out on the benefits.
As The Wall Street Journal reported, while Treasury officials were instrumental in establishing the international accord and President Joe Biden has pushed to implement it, Congress hasn’t changed U.S. tax law to conform to it.
“Republicans generally oppose the global deal, contending that Biden administration negotiators gave away too much of the U.S. tax base,” according to The Wall Street Journal. “So for now, the U.S. isn’t directly collecting any money from domestic or foreign companies because of the deal.”
And now, several companies, including Johnson & Johnson, Baxter International and Zimmer Biomet, are all warning investors that the OECD deal will make them pay higher taxes this year as Switzerland, South Korea, Japan and European Union countries implement it, according to The Wall Street Journal. While U.S. companies that were subjected to single-digit tax rates in some foreign countries, now must pay at least 15% in each.
The Tax Foundation argued that if U.S. policy does not shift, U.S. companies will be caught in a confusing web of minimum taxes including Global Intangible Low-Tax Income (GILTI), the Base Erosion and Anti-Abuse Tax, the new Corporate” Alternative Minimum Tax from the Inflation Reduction Act, and likely some portion of the global minimum tax rules.”
In addition, the Tax Foundation said recent guidance means that U.S. GILTI would apply after foreign minimum taxes, reducing U.S. tax revenues from that policy.
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