|
Op-Ed: Global corporate minimum tax is a
step backward
[The Center Square] Daniel Savickas |
Taxpayers Protection Alliance
As the Biden
administration struggles to pass its destructive tax policies through
Congress, 136 countries took a step backward when they agreed to a 15%
global corporate minimum tax. In essence, this agreement will deter
companies from bringing businesses to low-tax nations by ensuring that
there are no more low-tax nations. This is especially foolish during a
global supply chain crisis that could stretch on for months. |
|
 Americans are suffering under the weight of a supply chain
shortage and runaway inflation, causing prices to soar higher. This corporate
minimum tax will mean that multinational companies won’t be able to find tax
relief anywhere. This will end up being another factor driving up prices and
limiting supply globally. The solution is tax competition, which would make
economic conditions more hospitable for commerce and trade.
Other nations are already raising concerns. Ireland, Estonia, and Hungary had
corporate rates below 15% coming into the negotiations. While they ultimately
relented and signed on to the agreement, they will likely see a hit to their
economies. The incentives for businesses to bring their resources and jobs to
those nations nearly evaporate as a result of this agreement. In fact, countries
like Singapore are scrambling to attract investors in light of the change.
Four developing countries did have the courage to eschew the agreement
altogether. Nigeria, Pakistan, Sri Lanka, and Kenya were the only nations in the
negotiations to walk away from the table. Kenyan and Nigerian representatives
have pointed out the vast uncertainty they would face from the agreement. Taking
the new deal would disrupt their existing tax framework. Such uncertainty might
harm their revenues and would deter investors from bringing business to those
nations.
Just because these four were the only ones to walk away does not mean this
uncertainty is unique to them. The tax structures in 136 nations are about to
change. Multinational businesses will be forced to make heavy adjustments to try
to maintain profits that will keep up production. Developing nations will no
doubt be most highly impacted, but the pain will be felt across the globe.
to top of second column] |
The type of production that will be halted or
slowed while corporations adjust is the exact kind of production
that will be needed to ameliorate the supply chain woes. Global
manufacturing hubs have been hit hard by coronavirus lockdowns and
demand has returned more quickly than they can return to full
capacity. What’s needed is for the corporations running these hubs
to be able to get back to capacity as soon as possible. A new,
sweeping global corporate minimum tax will instead sap additional
resources.
Beside the Biden administration being way off in
its domestic efforts to punish American businesses during this
trying time, this deal seeks to incentivize other nations to do the
same, under threat of global ostracization. If the administration
wants to prevent corporations from leaving to lower tax havens, the
solution is to make the tax framework more friendly domestically,
not to make it intentionally worse everywhere else.
The silver lining is that this agreement is not set in stone yet. It
still needs to be ratified in Congress. Moderate Democrats have
already raised opposition to the proposal, urging party leadership
to halt progress on ratifying the deal. Democrats at all levels of
government are getting pushback on a variety of tax hikes and are
feeling pressure due to the supply chain crisis and rising
inflation. Not only does this agreement fail to address these
problems, it would exacerbate them.
Members of Congress in both parties must reject this approach. Doing
so will send a signal to our allies globally that America will not
force them into harmful tax changes all for the sake of fulfilling
partisan priorities for an administration that is floundering at the
moment. We ought to be fostering global commerce and making it as
easy as possible for businesses to get up and running again.
Daniel Savickas is government affairs manager for the
Taxpayers Protection Alliance.
|
