BofA Says Chance Of Global Corporate Minimum Tax Hit Is Rising—Thanks To Biden


As lawmakers and policy experts in Washington debate the merits of President Biden’s proposed changes to the corporate tax system, experts from Bank of America said Friday that one element of Biden’s plan—a global minimum tax—has a better chance of becoming reality than it used to. Here’s why.

Key Facts

Unlike Biden’s other tax proposals, a global minimum tax cannot be enacted by the United States alone: other world economies would also need to agree on the minimum and pledge not to undercut it. 

The Biden administration hopes this type of international cooperation on corporate taxes will prevent multinational companies from relocating in search of lower tax rates because rates would be essentially the same everywhere.

“It is very hard to get global agreements on taxation,” the analysts wrote, “but there is a better chance today than in the past.”

That’s partially because of the current political environment, which the analysts describe as “ripe for progress.” 

They cite elements of President Trump’s 2017 Tax Cuts and Jobs Act designed to reduce profit shifting as evidence of common ground between Republicans and Democrats on the issue—despite disagreements on the nitty gritty policy details—and note that attention across the globe is now shifting to issues surrounding income and wealth inequality.

The analysts also suggest that despite the difficulty in enforcing a global minimum tax, other elements of Biden’s plan and proposed changes in the works within the Organization for Economic Cooperation and Development could be enough to bring other countries on board with the plan.

Crucial Quote

“Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations and spurs innovation, growth and prosperity,” Treasury Secretary Janet Yellen said earlier this month.

Big Number

7. Out of the top ten locations for U.S. multinational profit in 2018, that’s how many are considered tax havens, according to the Treasury Department: They are Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland. Those seven small countries accounted for 61% of after-tax income for U.S. multinational corporations in 2018 and 2019.

Chief Critic

Many businesses oppose Biden’s push for a global minimum tax. “Business Roundtable members welcome the Administration’s focus on ensuring the international tax system creates a more level playing field for globally engaged U.S. companies,” the group’s CEO Joshua Bolten said in a statement. “The Administration’s proposed global minimum corporate tax rate, however, threatens to subject the U.S. to a major competitive disadvantage.”

Key Background

Biden campaigned on a platform of tax hikes for the wealthy and for big corporations, many of which he’s unveiled as part of the plan to pay for his administration’s $2+ trillion infrastructure spending proposal. On the corporate side, those tax changes include a 15% minimum tax on book income for the largest corporations, raising the corporate tax rate from 21% to 28%, and doubling taxes on profits for foreign subsidiaries of American companies.

What To Watch For

Bank of America’s analysts suggest that the success of a global minimum tax will depend on the effectiveness of incentives for low-tax countries to participate as well as the closing of tax loopholes for countries that opt out. 

Further Reading

 IRS Commissioner Says Tax Gap Could Exceed $1 Trillion Per Year (Forbes)

98% Of CEOs Say Biden’s Corporate Tax Rate Hike Will Hurt Their Companies, According To Survey (Forbes)

Biden Says He’s ‘Willing To Negotiate’ 28% Corporate Tax Rate Hike (Forbes)

Who Will Be The Biggest Losers From Biden’s Tax Hikes? (Forbes)

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