IMF leader praises US global corporate tax proposal
May 26, 2021 - 05:38 AM
WASHINGTON — The IMF on Tuesday praised Washington’s proposal for a minimum global tax rate of 15 percent on corporations, say it would unlock more resources for governments to invest in areas like education, health or infrastructure.
While there have been proposals for setting the rate at as much as 21 percent, “anything that is above what today in many places is 10 (percent) or even lower is a benefit,” said Kristalina Georgieva, managing director of the International Monetary Fund.
The Washington-based crisis lender has long advocated an agreement on a common global tax, she said in a conversation with The Washington Post.
“Why? Because when we have it, there is no race to the bottom and less tax avoidance,” Georgieva said.
That means “more money in the public purse to invest in education and healthcare, and infrastructure, digitalization — all the good things we recognize we have to invest more into.”
However, she acknowledged the challenge in finding “the sweet spot” for the global economy between that idea and the best rate for national governments, given some countries have relied on low tax rates to compete.
Organization for Economic Cooperation and Development (OECD) member countries agreed in principle in 2015 to work on a plan to prevent corporations from evading taxes by moving headquarters to low-tax countries, a process known as base erosion and profit shifting.
Years of negotiations made little progress, but the discussions were revived with the arrival of President Joe Biden in the White House.
Last week, his administration proposed to OECD partners a tax rate on multinationals of at least 15 percent, the first time the United States has formally suggested a global minimum rate.
US Treasury Secretary Janet Yellen will attend next week’s meeting of finance ministers from the Group of Seven advanced nations in London, who are expected to endorse the 15 percent proposal.
Her deputy, Wally Adeyemo, told Reuters on Monday that he expects to see “a lot of unified support” for the plan from the G7 nations.
The eurozone’s largest economies, Germany and France, have expressed support for the US plan.
The other issue dominating debate is how to handle taxation of major tech companies like Amazon, Apple, Google and Facebook.
The challenge is how to ensure “fair distribution” of taxes where the profits are made and where the companies are located, Georgieva said.