Big business to be hit with 15% minimum tax by G7 – but will it end there?
According to a Fox News article from the 5th of June 2021, “Big Tech may face some of the most significant impact of a proposed 15% minimum corporate tax rate that finance ministers for the G7 nations meeting in London supported Saturday.”
Of course big companies could simply try to work out other ways to move profits outside of the USA and other G7 countries to smaller countries and tax havens. However, if the Obama administrations bullying of Switzerland on the issue of secret bank accounts is anything to go by, they will likely try to bully smaller countries into complying with the new minimum.
After all, these countries are desperate after damaging their economies through harsh lockdowns; and of course politicians don’t care if the tax payer must pay for their mistakes.
In any case, this doesn’t affect US companies operating within the US without offshore operations, given that Trumps corporate tax of 21% is still well above the 15% mark. Biden, however, has indicated that he wants to reverse this, pushing taxes to 28%.
Strangely, Big Tech’s response so far has been positive. A similar attitude was seen in relation to other kinds of regulation; with Big Tech supporting proposals to increase regulation in general. But why? One possibility is that it makes it more difficult for smaller rivals to thrive when there are tax and regulatory barriers. Although, 15% seems pretty low, it is likely many of these nations will set them higher making it more difficult for startups.
If the new minimum is implemented amongst all OECD countries, smaller countries like Ireland which relies on a 12.5% tax rate to attract business may suffer; and at the same time allows bigger countries off the hook in terms of reforms to improve government efficiency.