Topline
Treasury Secretary Janet Yellen and the Organization for Economic Cooperation and Development (OECD) announced Thursday that 130 countries including Switzerland, China and India have agreed to back a global minimum corporate tax rate of at least 15%, a policy priority for the Biden Administration, which has proposed major tax hikes on corporations to fund investments in infrastructure and social services.
Treasury Secretary Janet Yellen on June 23, 2021.
Key Facts
The 130 countries that agreed to the framework include members of the OECD and all members of the G20.
“The framework updates key elements of the century-old international tax system, which is no longer fit for purpose in a globalized and digitalized 21st-century economy,” the OECD said in a statement.
The OECD said it expects the plan to be finalized in October and said it has the potential to raise $150 billion in extra tax revenue every year.
Big Number
90%. That’s the share of global GDP accounted for in the 130 countries that signed onto the plan, according to the OECD.
Key Background
The Biden Administration has pushed for a global corporate minimum tax rate in order to prevent what Yellen frequently describes as a “race to the bottom”: As countries seek to attract more foreign investment, they drive global tax rates lower as they compete with each other to create the most favorable environment for businesses, which in turn drives tax revenues down for everyone. There have been parallel efforts within the OECD and the G7 to create new frameworks to ensure that the world’s largest corporations aren’t able to avoid taxes by shifting their profits internationally. Last month, finance ministers from the G7 also agreed to a global minimum corporate tax rate of 15%.
Crucial Quote
“Today is an historic day for economic diplomacy,” Yellen said in a statement. “We have a chance now to build a global and domestic tax system that lets American workers and businesses compete and win in the world economy.”
Further Reading
130 countries and jurisdictions join bold new framework for international tax reform (OECD)
Yellen Pushes For Global Minimum Tax Amid Biden Infrastructure Blitz (Forbes)
G7 Finance Ministers Agree To 15% Minimum Global Tax Rate On Multinationals (Forbes)
New Details About Biden’s $2 Trillion Tax Plan Unveiled—Here’s What We Learned (Forbes)
