Biden’s Global Corporate Tax Gaining Steam

Mandatory Credit: Photo by Anna Moneymaker/POOL/EPA-EFE/Shutterstock (11766927y)US President Joe Biden delivers remarks at a virtual event hosted by the Munich Security Conference in the East Room of the White House in Washington, DC, USA on 19 February 2021.
Anna Moneymaker/POOL/EPA-EFE/Shutterstock / Anna Moneymaker/POOL/EPA-EFE/Shutterstock

President Biden has offered a new plan on taxing international companies in an effort to secure a multinational agreement to reduce tax avoidance, and it seems to be gaining international steam, The Wall Street Journal reports.

See: Nike and FedEx Among Companies That Paid $0 in 2020 Federal Income Tax
Find: Biden Not Convinced Higher Corporate Tax Will Drive Companies Out of US

The administration is looking to limit the number of companies that would fall under an agreement addressing the difficulties inherent in taxing income whose location is difficult to identify, according to the WSJ. Biden is now recommending an approach on companies’ size and profits rather than the characteristics of the business. 

This proposal is different from the prior one, which would have included more companies and a lower threshold for taxation. 

See: Yellen Calls for a Global Corporate Tax Minimum — Could She Stop Companies from Moving Overseas?
Find: Jeff Bezos Supports Corporate Tax Hikes in Biden’s $2 Trillion American Jobs Plan

Washington is hopeful that the proposal will help to resolve international talks spurred by the revelation that companies like Facebook and Amazon paid very little tax in some of the markets where they operated, the WSJ reports.

Make Your Money Work

The plan would apply to global profits of the world’s largest companies regardless of their physical presence in a given country, according to the Financial Times. It’s intended to stave off the use of tax havens, which allow massive corporations to pay little to no income tax on their operations by creating “shell” locations in places like the Cayman Islands and Switzerland. 

See: What Are the World’s Best Tax Havens?
Find: Biden Ditches Warren’s Wealth Tax in Favor of Raising Corporate Tax, Closing Loopholes, Ending Subsidies

Bloomberg reports that the drive to overhaul global corporate taxes gathered steam on Wednesday after a meeting of the G20 finance chiefs, which pledged to reach a deal by the middle of the year.

French Finance Minister Bruno Le Maire told Bloomberg TV that France is open to an even higher rate than the 12.5% proposed by the Biden administration. He also stated that France is weighing proposals from the U.S. on how to tax tech firms.

The proposal would allow countries to share the rights to tax companies like Facebook, which profits off users in almost every country but is not taxed by all those same jurisdictions.

Make Your Money Work

See: Here Are the Most and Least Tax-Friendly Countries
Find: Fortune 500 Companies That Haven’t Paid Federal Taxes Recently

The tax would apply only to companies that report large profits but low tax payments and with income exceeding $2 billion, according to the WSJ. Originally, Biden targeted a much lower threshold of $100 million but has since changed course to attract more allies.

The result would be that only 180 companies worldwide would be eligible through the income threshold, and only 45 of them would pay the tax.

This tax is different, and theoretically in addition to, Biden’s plans for pursuing raising tax rates on domestic and foreign income.

More From GOBankingRates

About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

Best Bank Accounts of May 2022

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.