Global Minimum Tax Near 21% Is Feasible, OECD Official Says
Japanese yen, U.S. dollar, and euro notes are arranged for a photograph. (Photographer: Tatsunori Misawa/Bloomberg News)

Global Minimum Tax Near 21% Is Feasible, OECD Official Says

Discover what’s driving the global economy and what it means for policy makers, businesses, investors and you with The New Economy Daily. Sign up here

U.S. President Joe Biden’s proposal to set a minimum global corporation tax at 21% is gaining momentum, with the official running international talks on the matter saying that an agreement could settle near that rate.

The Biden administration’s plan has turbocharged negotiations at the Organization for Economic Cooperation and Development on how to overhaul rules on how much tax companies pay, and where. The U.S. suggestion, while subject to negotiations in Congress, would be significantly higher than the 12.5% previously discussed in the talks.

“Will Biden get to 21%, or will it be a bit lower? We’ll see,” Pascal Saint-Amans, director of the center for tax policy at the OECD, said in the French senate on Wednesday. “As for the rest of the world, I doubt we’ll be at 21%, but would we be at a rate nearing 21%? I have good hope that is possible.”

The 139 nations negotiating at the OECD have set the summer as a target for getting a deal that could deliver a significant boost to tax revenues at a time when governments finances are stretched by the Covid pandemic.

Before the Biden proposal, the Paris-based organization said a global minimum rate could boost the global tax take by $100 billion. That figure would be significantly greater if the U.S. plan takes effect.

More Hurdles

There are still technical issues to iron out though, Saint-Amans said, including concerns from China that a minimum levy could prevent tax incentives designed to shift the Chinese economy away from manufacturing to research and knowledge.

He also said that while there could be an agreement on the architecture of the deal in the summer, a decision on a global rate wouldn’t come until October, once the U.S. has decided on its minimum levy.

Regarding a second pillar of the talks -- making multinationals pay more their tax to the governments of countries where they actually operate -- Saint-Amans said the U.S. proposal to target just the 100 most-profitable global firms is a huge simplification that could help get a deal.

European governments have also welcomed that proposal, although they are still working on technical details to ensure the profits of digital giants such as Inc. are covered.

“There’s a very high chance of success -- there are lots of challenges with 139 countries involved on an equal footing making it complicated to manage, but there’s a real will to make progress,” Saint-Amans said. “There’s an opportunity to end these curious years during which businesses profited from globalization without bearing any of the costs.”

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.