A critical piece of President Joe Biden’s strategy to ensure that American corporations cannot run from the higher taxes he wants to impose is now in place.
On Friday, 136 nations agreed to set their corporate tax rates no lower than 15 percent, according to CNN.
The deal also requires companies to pay taxes in the nations where they do business, not just where they have a physical presence.
The global minimum tax is now supported by all of the countries in the Organization for Economic Cooperation and Development and the Group of 20.
Ireland had held out, fearing the repercussions of upping its current corporate tax rate of 12.5 percent. It signed on after winning an exemption from the higher rate for its small businesses.
“Today’s agreement will make our international tax arrangements fairer and work better,” OECD Secretary-General Mathias Cormann said in a statement. “This is a major victory for effective and balanced multilateralism.”
U.S. Treasury Secretary Janet Yellen said in a statement that “virtually the entire global economy has decided to end the race to the bottom on corporate taxation.”
“Rather than competing on our ability to offer low corporate rates, America will now compete on the skills of our workers and our capacity to innovate, which is a race we can win,” she said, according to The Washington Post.
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“The arcane language of today’s agreement belies how simple and sweeping the stakes are: When this deal is enacted, Americans will find the global economy a much easier place to land a job, earn a living or scale a business,” Yellen said.
“President Biden often talks about a ‘foreign policy for the middle class.’ Today is what foreign policymaking for the middle class looks like in practice.”
Biden said the deal will “ensure that profitable corporations pay their fair share, and provide governments with the resources to invest in their workers and economies.”
The agreement requires the approval of Congress to rewrite part of the U.S. tax code, and Republicans have indicated that they have some concerns.
The Biden administration has “used this global forum to advance its short-sighted domestic tax agenda,” Republican Sen. Mike Crapo of Idaho and Republican Rep. Kevin Brady of Texas said in a statement.
“By doing so, the Biden Administration is putting politics over progress and surrendering the fate of the U.S. economy to our foreign competitors.
“Today’s announcement confirms the Biden Administration has overshot the mark in its race to raise the U.S. global minimum tax to the highest in the world, putting America at a serious disadvantage and making it better to be a foreign company or worker than an American one,” the lawmakers continued.
“As other countries delay implementation and secure side agreements and carveouts to protect their own companies, U.S. businesses will be hit by tax increases ultimately borne by American workers, savers and consumers,” they concluded.