World Why global tax talks are back on the agenda
Why some of the most liberal Democrats in Congress want to bring back a tax break for the rich
Democrats want to raise taxes. So why are they debating cutting them for some well-off taxpayers?In their 2017 tax bill, Republicans partially closed a tax loophole that mainly affected higher-income people in high-tax areas — i.e., relatively well-off people in blue states. They capped the state and local tax deduction (SALT) people can take when calculating their federal income tax at $10,000. People can still deduct state and local taxes from their federal tax bill, but only up to that point.
International efforts to reform business taxation have been given new impetus by the new US administration.
Under President Joe Biden and his Treasury Secretary, Janet Yellen, the US has moved on two key areas where the negotiations were stuck.
One is having a minimum tax rate for corporate profits. The other is some exemptions on digital services taxes that the US had previously sought.
The goal of a global accord by mid-2021 now appears more credible.
The negotiations, co-ordinated through the Organisation for Economic Co-operation and Development (OECD), are building on.
Longtime tax target Amazon now leads charge for reform
A longtime lightning rod for critics of corporate tax avoidance, Amazon now wants to lead the way on reform. Amazon chief executive Jeff Bezos this week endorsed a higher corporate tax to help fund infrastructure as part of a "balanced solution that maintains or enhances US competitiveness." The move by Amazon comes after years of criticism by activists who claim it pays little or no corporate taxes. According to the Institute on Taxation andAmazon chief executive Jeff Bezos this week endorsed a higher corporate tax to help fund infrastructure as part of a "balanced solution that maintains or enhances US competitiveness.
The talks, which extend beyond the OECD's own member countries, are organised around what they call two pillars.
Both the issues have a bearing on all types of multinational business, but they are particularly acute in relation to some technology businesses.
The first is how to allocate profits, or revenue, between countries for taxing them.
Digital technologies make it so much more feasible to have a commercial relationship with a country, and make money from it, without any kind of physical presence.
So the debate is about ensuring that all types of business pay whatcalled "a fair contribution to support our vital public services".
G20 agrees more help for poorest Covid-hit nations
G20 finance ministers and central bankers agreed Wednesday to extend a moratorium on debt interest payments for the poorest countries, which could lag behind the global recovery from the coronavirus pandemic. The G20 said the debt moratorium, which was introduced in April last year and extended in October until June 30, would be prolonged one more time until December. "This final extension will allow beneficiary countries to mobilise more resources to face the challenges of the crisis and, where appropriate, to move to a more structural approach to address debt vulnerabilities," its statement said.
Going it alone
In the absence of an agreement in the OECD, some countries, including the UK, have gone ahead with their own digital services taxes.
applies a 2% tax to the revenues (provided they exceed certain thresholds) derived from UK users of online marketplaces, social media and internet search engines.
The UK and some other countries have promised to discontinue the unilateral tax if there is an "appropriate" international agreement.
One of the factors impeding progress towards such a deal was the US's insistence on what was called a "safe harbour" provision. Critics described it as making the tax optional, a characterisation that Trump administration officials rejected.
But however it is described, the Biden administration has dropped the idea.
In fact, the US isto have actively proposed a system in which multinationals would pay taxes based on their sales in each country - along the same general principles as the British and other unilateral taxes.
Republicans Keep Worshipping at This Zealot’s No-Tax Altar
Grover Norquist, the high priest of Republican tax-cutting, may not be as prominent as he was in the 1990s, but he is the reason that Joe Biden can’t afford to lose a single senator or more than a handful of House members without losing his entire economic agenda. Norquist, who once said his goal is to starve the government down to the size “where we can drown it in the bathtub,” has been remarkably successful at shaping a political environment that makes it hard to even talk about, let alone succeed in, raising taxes. He’s in a tight corner now, but it would be dangerous to write him off as old news. When President George H.W.
According to the FT, only very large firms would be subject to these tax arrangements under the US proposals.
That said, there are different, and rather complex, ideas under discussions in the negotiations. They would allocate profits beyond a certain baseline level to countries where the multinational company gets its revenue.
The second pillar is a global minimum corporate tax rate. If that were applied widely enough, it would weaken the incentive that multinational companies have to shift their profits to places where the tax rate is lower.
The Trump administration opposed this. Now the US is in favour.it would end what she called a race to the bottom, to see who can lower their corporate tax rate further and faster.
Why has the US position changed? The Biden administration's plans include a large programme of spending on infrastructure - traditional, such as roads, bridges and ports, and modern, such as broadband and clean energy.
The president and his Treasury secretary want to finance it to a large extent with higher rates of corporate tax. An international agreement could forestall efforts that other countries would be tempted to make, to entice American firms to choose them over the US.
There is a long history of international agreements on taxation. In the past, the aim tended to be to prevent "double taxation", the same income, personal or business, being taxed in twice in different jurisdictions.
More recent negotiations, including those in the OECD, have often had the opposite aim: the prevention of what has been called "double non-taxation".
Joe Manchin Puts a Damper on Biden's Infrastructure Plan, Says It Risks U.S. Competitiveness .
"There's six or seven other Democrats who feel very strongly about this. We have to be competitive," the West Virginia senator said.Biden and the White House unveiled the $2 trillion American Jobs Plan last week, touting the need to build the nation's crumbling infrastructure, restore manufacturing and create good paying jobs in order for the U.S. to continue to be a leader in innovation and stand up to China's growing influence around the world.