Kale Goodman is a serial entrepreneur and has over 18 years of service in the accounting field.
The Biden Administration rolled out their 2-trillion-dollar infrastructure plan last week with a plan to pay for it through corporate taxes. That includes an idealistic 21% tax rate on multinational companies.
Discussions on a global level have been occurring since Wednesday between G-20 countries and around 120 more. France and Germany, in particular, are in support of the U.S. leading the way on these discussions and hoping to reach a resolution between all 140 countries by midsummer.
"The support of the United States of America is a very decisive push," German Finance Minister Olaf Scholz said at a press conference on Tuesday.
The Organization for Economic Cooperation and Development(OECD) discussed a 12.5% minimum global tax when Biden proposed his plan. There are doubts that even with all 140 countries' support, the OECD is influential enough to enforce the board's tax policies.
"I don't know whether they're going to be able to pull it off," said Michael Moore, a professor of economics at George Washington University's Elliott School of International Affairs. "It's hard to do things like this."
The purpose of creating a minimum global tax on multinational companies is to eliminate large companies from "gaming the system." For example, finding tax havens in other countries or moving their base of operations to a different country with lower tax rates. If all these different countries can agree to a minimum tax rate, their governments can monitor these multinational companies more closely and ensure they pay their taxes.
There is no "agreed-upon tax rate," but Biden is pushing for 21%, which he detailed in his infrastructure plan. That doubles the current foreign income tax that's 10.5%. It's quite a leap for them to make, but $2-trillion is expensive.
Besides keeping an eye on large corporations, these tax discussions between world leaders signify that the U.S. is re-entering global politics. During Trump's era, the U.S took a step back from the international stage, but this could change that.
The other issue is where to tax these large corporations like Google and Amazon. They are taxed where their base of operations is but discussions about taxing these companies where they receive their revenue are on the table. However, this means that the U.S. would be losing out on some revenue from Facebook and similar corporations.
That's not all Biden is proposing. The Biden Administration proposed working with large tech companies to generate a mechanism that shares taxes between countries where they run. So there would be ways for the U.S. to keep track of corporations and their taxes overseas and a way to share those profits.
Without these discussions turning into a treaty, anyone can back out and change their mind. Biden's infrastructure plan still has not gone through congress. Despite that, the U.S. is moving ahead with negotiations. The government will have the ability to monitor corporations' taxes and eliminate tax havens if the plan goes through. Now, it's just a waiting game.
© 2021 Kale Goodman