The International Monetary Fund (IMF) praised Washington’s proposal for a minimum global tax rate of 15 percent on corporations, pointing out it would bring out more resources for governments to invest in areas like education, health or infrastructure.
The managing director of the IMF, Kristalina Georgieva, stated that while there have been proposals for setting the rate at as much as 21 percent, “anything that is above what today in many places is 10 (percent) or even lower is a benefit.”
The IMF has long advocated an agreement on a common global tax. “Why? Because when we have it, there is no race to the bottom and less tax avoidance,” Ms. Georgieva said. It means that more money in the public purse to invest in education and healthcare, and infrastructure, digitalization, all the good things we recognize we have to invest more into.
Ms. Georgieva acknowledged the challenge in finding the sweet spot for the global economy between that proposed idea and the best rate for national governments, given some countries have relied on low tax rates to compete.
In 2015, the Organization for Economic Cooperation and Development (OECD) member countries agreed to work on a plan to stop corporations from escaping from taxes by moving their headquarters to low-tax countries, a process known as base erosion and profit shifting.
The negotiations made little progress and it got restored with the arrival of President Joe Biden in the White House. Last week, the US administration proposed to OECD partners a tax rate on multinationals of at least 15 percent, the first time the country has formally suggested a global minimum rate.
US Treasury Secretary Janet Yellen will attend next week’s meeting of finance ministers from the Group of Seven (G7) advanced nations in London, who are expected to endorse the 15 percent proposal.
The eurozone’s largest economies, Germany and France, have expressed their support for the US plan. The other issues that are expected to dominate in the debate are how to handle the taxation of technology giants like Amazon, Apple, Google and Facebook.
The major challenge is how to ensure fair distribution of taxes based on where the profits are made and where the companies are located, Ms. Georgieva said.