José Antonio Ocampo | June 4, 2021 | El Tiempo
In most developing countries, we have learned not to have too many expectations when a new tenant is installed in the White House. However, we should applaud the good initiatives of the new administration, such as the decision earlier this month to back waivers on COVID-19 vaccine patents so that they can be produced in other countries. But that is not all. Joe Biden may also be on the verge of profoundly changing development funding, by tackling an issue he was not expected to address: taxation.
To finance a US $1,900 billion recovery plan, Washington wants to look for the funds where they are: in the bank accounts of the wealthiest and of multinationals. To this end, the new administration wants, among other measures, a minimum corporate tax rate of 21% on the profits of companies abroad. This means that, for example, subsidiaries of US multinationals established in Ireland, where the rate is 12.5%, will immediately pay an additional 8.5% in taxes to the tax authorities in their home country.
This is, of course, a unilateral decision, but it is also a great opportunity for the rest of the world. In fact, the introduction of a global minimum tax is one of the main recommendations of the Report on Financial Integrity for Sustainable Development – presented last February by a United Nations high-level panel, the FACTI – of which I am a member. If endorsed by US Congress, and followed by a significant number of countries, the Biden administration’s proposals would be the biggest shake-up in corporate taxation in decades. Multinationals would no longer have an incentive to disguise their practices by artificially concentrating their profits in low- or no-tax jurisdictions. Rather, it would effectively be the end of the tax haven business model.
Originally published by El Tiempo. Read the full article here.