U.S. Treasury Secretary Janet Yellen revealed that 130 nations have agreed to a global minimum tax (GMT) on corporations as part of a larger agreement to update international tax rules. The Biden administration has urged that the rate be at least 15 percent, but Yellen has yet to announce an agreed-upon rate. The agreement — intended to end the practice of global corporations moving their headquarters to low-tax international jurisdictions — is a “key element” of Biden’s domestic plans for revenue and spending.

CNBC reports Yellen stated that, “for decades, the United States has participated in a self-defeating international tax competition, lowering our corporate tax rates only to watch other nations lower theirs in response.” “The result was a global race to the bottom,” she continued. “Today’s agreement by 130 countries representing more than 90 percent of global GDP is a clear sign: the race to the bottom is one step closer to coming to an end.”

The Organization for Economic Cooperation and Development created the groundwork last fall by releasing “the OECD Inclusive Framework on Base Erosion and Profit Shifting … a blueprint … outlining a two-pillar approach to international taxation.”

Later this month, G20 finance ministers and central bank governors will meet in Venice, Italy and “the international tax plan is expected to be high on the agenda.” The Biden administration and national security advisor Jake Sullivan crafted a “foreign policy for the middle class” that “emphasizes how foreign policy and domestic policy can be integrated into a new middle ground between the traditional conservative and liberal approaches to global affairs.”

The Wall Street Journal reports that among the 130 countries that signed on to a GMT are “all of the Group of 20 major economies, including China and India, which previously had reservations about the proposed overhaul.” The OECD “estimates that governments lose revenue of between $100 billion and $240 billion to tax avoidance each year.”

The tax overhaul will impact not just Big Tech companies but “any large, global businesses that have a profit margin of at least 10 percent on global turnover of about $24 billion.”

The Biden administration wants to raise the U.S. corporate tax rate to 28 percent from 21 percent and the minimum tax on U.S.-based companies’ foreign profits to 21 percent from 10.5 percent. “This will level the playing field and make America more competitive,” said President Biden. “And it will allow us to devote the additional revenue we raise to making generational investments, which are necessary to keep America’s competitive edge razor sharp in today’s global economy.”

WSJ notes, however, that, “objections from Democrats are likely to cap the corporate tax rate at about 25 percent.” Representative Kevin Brady (R-Texas), lead Republican on the House Ways and Means Committee, said, “this is a dangerous economic surrender that sends U.S. jobs overseas, undermines our economy and strips away our U.S. tax base.”

Among the European companies objecting to the minimum tax rate are Ireland, where many Big Tech companies are headquartered, Hungary and Estonia as well as Nigeria, Kenya, Peru and Sri Lanka.

Related:
France’s Finance Chief Says It Would Be Very Disappointing if Some EU Nations Oppose Global Tax Deal, CNBC, 7/6/21
Why the Global Minimum Tax Deal Is a Win for Silicon Valley, Barron’s, 7/3/21
White House Urges More Countries to Sign 15% Global Corporate Tax Pledge, Reuters, 7/2/21