Experts are concerned that President Joe Biden’s new global minimum tax rate of 15 percent on large multinational corporations will harm the small businesses that support them.
Treasury Secretary Janet Yellen confirmed on Oct. 30 that leaders of the world’s 20 biggest economies (G-20) have endorsed the “historic agreement” on new international tax rules, including a global minimum corporate tax rate of 15 percent.
The new rule would also make it harder for multinational firms, including tech giants such as Google, Amazon, and Facebook, to avoid taxation by establishing offices in low-tax jurisdictions.
It’s estimated that the measure will generate around $150 billion in additional global tax revenues annually, while stabilizing the international tax system and increasing tax certainty for taxpayers and tax administrations, according to the Organization for Economic Cooperation and Development (OECD).
The new global minimum tax rate has been championed by Biden, who hailed it as a “game-changer,” while Yellen told CNBC that what it will “provide is a level playing field globally where companies and countries can compete, on the basis of their innovative ideas, fundamentals, the quality of workforce, and their business environments.”
“Countries around the globe have decided that to finance the public infrastructure investments that they need to invest in their people, and not to have all of the burden of raising taxes fall on workers … this is a way to make sure that all countries in a fair way can collect more,” Yellen said.
Biden has also proposed a separate 15 percent tax rate called the “Corporate Profits Minimum Tax,” which would apply to roughly 200 U.S. corporations making more than $1 billion in profits annually.
Combined, both tax rates could leave America’s largest businesses paying more than 30 percent in new taxes.
The Business Roundtable, which represents some of the largest companies in the United States, said the two tax proposals impose $800 billion in tax increases on businesses and would “aggravate the serious competitive disadvantage faced by U.S. companies relative to their foreign competitors.”
But experts fear the new 15 percent global minimum tax could inadvertently harm small businesses in the United States that support the multinational corporations, leaving them exposed and making it more difficult for those firms to enter foreign markets because of the higher cost of conducting business abroad.